Solid-state lighting specialist Color Kinetics (NASDAQ:CLRK) will shine a light on its 2007 first-quarter financial results on Thursday, April 26.

What analysts say:

  • Buy, sell, or waffle? Eight of the nine analysts covering Color Kinetics rating the stock a buy. The one who advocates selling has held that position since last October. Since then, despite some ups and downs, the stock has been flat.
  • Revenues. Revenues are expected to jump 30% to $18.9 million.
  • Earnings. Profits, however, are expected to soar 150% to $0.10 per share.

What management says:
Color Kinetics president and CEO Bill Sims noted "there's little doubt among industry leaders that LEDs will play an integral role in the future of lighting," and he promised that his company will lead the way forward. With 58 patents issued and 170 pending, Color Kinetics certainly has the wherewithal to do so. But its licensing and royalty revenues significantly declined last year after it lost two customers. Fortunately, revenue from lighting systems comprises more than 80% of Color Kinetics' total sales, and that segment has enjoyed continued rapid growth.

What management does:
The solid-state lighting company sells intelligent LED lighting systems, such as those installed at Harrah's (NYSE:HET) casinos, Marriott (NYSE:MAR) hotels, and elsewhere, along with modules and components that manufacturers can use in their own products. It also licenses its products to other companies in exchange for royalties. With proposals to ban incandescent bulbs gaining strength, the LED industry should soon lead the way toward longer-lasting, more efficient lighting systems.

Color Kinetics' gross and operating margins have improved over the past year, thanks largely to its recognition of previously deferred profit on inventory for the CK Japan subsidiary it sold in 2006.

Margin

12/05

03/06

06/06

09/06

12/06

Gross

52.9%

53.7%

54.8%

55.6%

56.1%

Operating

10.4%

9.5%

8.6%

9.2%

10%

Net

8.2%

6.9%

5.5%

4.9%

5%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
As a shareholder in Color Kinetics, I've already backed up my belief that the LED leader will continue to dominate. Its patents form the foundation of the LED industry, and despite competitors' grousing, those patents have been upheld by the courts. In a series of high-profile lawsuits with Super Vision -- now called Nexxus Lighting (NASDAQ:SUPVA) -- the courts ruled that Color Kinetics' five patents are not only valid, but that Super Vision was infringing on them. After years of fighting, the two settled their differences in December. Nexxus will pay Color Kinetics $825,000 over 12 months; in return, it gains a license to use Color Kinetics' patented technology in its own products. That's a fairly sweeping victory, and one of the primary reasons why, despite intense competition from Cree (NASDAQ:CREE) and divisions of Philips (NYSE:PHG) and Siemens (NYSE:SI), Color Kinetics should continue to perform well in the future.

Shed some light on further Foolishness:

Color Kinetics has earned a five-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock-rating service by joining today. It's free!

Fool contributor Rich Duprey owns shares of Color Kinetics, but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.