Earnings Roundup: Ethan Allen Interiors, P.F. Chang's China Bistro, Plug Power

The market settled yesterday after Monday's indigestion. The bounce likely had something to do with the good news from Boeing (NYSE: BA) and Amazon.com (Nasdaq: AMZN). There were a good deal more earnings reports Tuesday, both during the day and after the close. We selected a few here to discuss. In order to more clearly express our approval or disapproval toward the stock's outlook and management's performance, we will provide a rating of either Opa! (bravo! or "Buy") or Sopa! (quiet! or "Sell").

Ethan Allen Interiors (NYSE: ETH) reported earnings Tuesday, posting EPS of $0.65 in its fiscal fourth quarter. This was in line with analysts' consensus, though a penny short of last year's figure. Net sales declined 5%, but gross margin improved over 200 basis points on sales mix improvement and cost containment efforts. Operating margin still narrowed 100 basis points, but a lower tax rate and significant share repurchases allowed the company to preserve the bottom line. Ethan Allen's 65% domestic manufacturing and sourcing is admirable to us, as is its quality distinction and market leadership impressive, in our view. We give Ethan Allen an Opa! on its report, as despite a difficult operating environment, management seems to have a handle on inventory and in differentiating its products well.

ETH 1-yr chart

P.F. Chang's China Bistro (Nasdaq: PFCB) reported earnings Tuesday, but missed its own guidance while reporting second quarter EPS of $0.36, versus $0.30 in the prior year period. Same-store revenues were disappointing enough for the company to revise forecasts lower for the remainder of the year. Traffic at both the P.F. Chang's China Bistro restaurants and Pei Wei Asian Diner locations trailed forecasts, likely due to significant store presence in California, an especially hard hit housing market. The rising price of gasoline seems to be impacting casual dining chains hard, so we expect the entire industry to experience valuation adjustment and decreasing earnings estimate momentum. PFCB revised its forecast for 2007 revenues and EPS lower, now expecting to earn $1.34 in '07, from $1.38 previously seen. We have to give PFCB a Sopa! as a result.

PFCB 1-yr chart

Plug Power (Nasdaq: PLUG) posted a second quarter loss of $0.19, six cents worse than the consensus expected. Revenues of $4 million exceeded the consensus forecast for $1.9 million, as compiled by Thomson Financial. Installations of 41 GenCore Systems sharply exceeded the prior year achievement of 17. PLUG attributed its loss expansion to acquired businesses. Operating cash burn allows the company some leeway before it needs to raise capital, but we are not enthused about its products' mass appeal. With most of its revenue coming from R&D Contract line, and not product sales, and most of the interest seemingly from government organizations, we are skeptical of its near term growth potential. Fuel cell technology is mostly dependent on natural gas, and as long as natural gas pricing is relatively expensive, we believe there is no alternative energy advantage provided. We would not regard PLUG along the same lines as its solar and wind peers, and that's likely the reason PLUG trades at a valuation (0.92X book value) discount to companies like First Solar (Nasdaq: FSLR) (20X) and Trina Solar (NYSE: TSL) (7.5X). We have to give PLUG a Sopa! for this reason.

PLUG 1-yr chart