The last bastion of a bygone era, U.S. paging king USA Mobility (NYSE:USMO) will report firs-quarter earnings on Wednesday. Let's get the jump on what's in store.

What analysts say:

  • Buy, sell, or waffle? Talk about the ugly stepchild -- the Wall Street analyst community largely shuns USA Mobility. Only one analyst, from Matrix Research, even puts out estimates on the company. Matrix's conclusion? Sell. In our Motley Fool CAPS investor database, 20 of the 39 investors who have rated the stock give it the thumbs-down, and it merits only a one-star rating out of a possible five.

  • Revenues. Matrix looks for the company to report $109.5 million in revenue this quarter, down 19% from last year.

  • Earnings. Our lone analyst is expecting $0.30 per share in earnings, well below the $0.45 reported a year ago.

What management says:
USA Mobility is milking the decaying paging industry for all the cash it can while it looks around for new ways to generate revenue from wireless services. And the company is indeed fighting back as paging customers defect to wireless alternatives from competitors Verizon Communications (NYSE:VZ) and AT&T (NYSE:T). We're told that CEO Vincent Kelly's priorities for 2007 are these: "(1) drive cash flow by supporting a low-cost operating platform, (2) preserve revenue per unit, (3) reduce paging subscriber erosion, and (4) maximize revenue opportunities around our core business segments, particularly health care."

What management does:
The company has shown that you can still make money in the paging business. With the rate of subscriber losses slowing, operating and net margins are perking up slightly as USA Mobility is able to improve operating efficiency. This has kept free cash flow fairly steady, with the only concern being a recent dip to $126.1 million in 2006 that is partly due to an increase in capital expenditures.

Metric

12/05

3/06

6/06

9/06

12/06

Gross Margin

64.4%

64.1%

64.1%

64%

63.7%

Operating Margin

7.5%

10%

12.7%

14%

14.9%

Net Margin

2.1%

4.3%

7.1%

7.6%

8.1%

Operating Cash Flow*

$139.3

$151.2

$150.5

$154.1

$147.2

Free Cash Flow*

$125.8

$135.8

$133.4

$135.8

$126.2
*In millions. 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:
While nobody seems to want to touch USA Mobility with a 10-foot pole, this is the type of investment that Fools and value investors love to at least keep tabs on. It would be worthwhile for investors to monitor progress at the company this quarter to see whether it can maintain cash flow and capitalize on new revenue opportunities, such as its deal to resell Sprint Nextel (NYSE:S) products. Investors willing to wade into these murky waters can keep afloat with a special $1-per-share payout that was just announced -- and that's on top of a whopping 12% yield.

That huge yield comes with comparable risk, however, as the anticipated regular quarterly payout for 2007 is more than double the lone estimate for 2007 earnings per share -- $2.60 vs. $1.03. Investors had better enjoy that yield while they can, because there is a tremendously high risk that it won't be around in just a few years.

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Fool contributor Dave Mock keeps his old numeric pager, figuring someday it will be a prominent display in a technology museum somewhere. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool has a disclosure policy.