Foolish Forecast: Ionatron Fried?

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Real live ray-gun maker Ionatron (Nasdaq: IOTN) reports Q1 2007 earnings results tomorrow morning. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

• Buy, sell, or waffle? A single analyst follows Ionatron, rating it a buy.
• Revenue and earnings. This analyst performs the neat trick of predicting a $0.04 per share loss tomorrow ... without having any idea what kind of revenue Ionatron made.

What management says:
A quick scan of the most recent 10-K tells us that the firm lost $17.5 million on $10 million in sales last year -- a loss equal to 250% of the combined losses of the previous two years. This as sales plunged nearly 50%. Things are going downhill here, Fools, and quickly. (On the "plus" side, from a free cash flow perspective, the firm ran negative to the tune of $9.1 million -- only 60% worse than in 2005.)

What management does:
Unlike serious, profitable defense firms like Lockheed Martin (NYSE: LMT), General Dynamics (NYSE: GD), Raytheon (NYSE: RTN) or Armor Holdings (NYSE: AH), Ionatron continues to take a blaster to its investors' capital. Over the last 18 months, its already single-digit gross margin steadily deteriorated, eventually ending the year in the red. Naturally, that left less than nothing with which to report operating or net profits.

Margin	9/05	12/05	3/06	6/06	9/06	12/06
Gross	8.1%	5.9%	5.9%	5.4%	2.7%	(0.9%)
Operating	(18.9%)	(22.7%)	(24.0%)	(36.4%)	(58.4%)	(112.1%)
Net	(20.1%)	(19.2%)	(25.3%)	(44.1%)	(78.4%)	(174.6%)

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:
In the days leading up to its earnings news (or rather, lack thereof), Ionatron gave its boosters a boost of their own in the form of a series of press releases.

One, issued April 30, describes a contract from the U.S. Navy to test out a "Dual Effects, Stand-Off IED Neutralization System" -- essentially, a bomb zapper -- for use by the Marines. Reporting on the story, AP misplaced a decimal when describing the company as having "a market cap about equal to the contract," however. At nearly half a billion dollars' market cap, Ionatron sells for nearly 1,000 times the value of the $500,000 contract in question.

Although the press release does not make this clear, the contract in question appears to be part of a larger, $9.8 million contract described in a separate release less than a week earlier. Missing from both announcements is any description of the time span over which Ionatron expects the funds from this contract to be disbursed. I suppose it goes without saying that the firm gives no indication of whether it expects to earn a profit on the work.

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Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.