As most of Wall Street obsesses over mid-2007 company results, X-ray-detection specialist American Science & Engineering (NASDAQ:ASEI) has already left 2007 behind. On Monday, it gives us our first glimpse of how fiscal 2008 is shaping up.

What analysts say:

  • Buy, sell, or waffle? Half a dozen analysts inspect AS&E. One says to buy it. One says to sell it. Everyone else sits on the fence with hold ratings.
  • Revenues. On average, they're looking for 24% sales growth to $37.1 million.
  • Earnings. Profits are predicted to rise 17% to $0.48 per share.

What management says:
We covered AS&E's year-end earnings conference call in detail back in May. Rather than reinvent the wheel, I'll just point you to our write-up to get the lowdown. That said, one detail went missing, both from AS&E's written earnings release, and its post-earnings release conference call: a tally of the firm's cash profits for the year. With the 10-K having since been released, we now can fill in the blank.

In fiscal 2007, AS&E generated $40.1 million in free cash flow. That's 63% more than the firm reported as net profits under GAAP, and a 39% year-over-year improvement.

What management does:
Meanwhile, back at the GAAP ranch, we see the effect of stock options expensing (among other things) doing significant harm to AS&E's margins. Rolling gross, operating, and net margins have all been sliding for three straight quarters. The trouble begins at the top, though, with CFO Ken Galaznik's observation that he "wouldn't look for dramatic improvement" in the gross in fiscal 2008. So you can probably expect that number to keep falling until it stabilizes somewhere closer to last quarter's 40.2%.

The good news, though, is that even that depressed number would outpace what rivals L-3 (NYSE:LLL), Analogic (NASDAQ:ALOG), and OSI (NASDAQ:OSIS) are grossing.

Margins

12/05

3/06

6/06

9/06

12/06

3/07

Gross

45.8%

47.8%

49.1%

48.5%

48%

45.8%

Operating

28.4%

29.9%

30.8%

28.5%

28.2%

27%

Net

22.9%

18.2%

18.2%

18.1%

15.9%

16.1%
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:
At Motley Fool Rule Breakers, where we've recommended the company, our analysts routinely describe AS&E's earnings as "lumpy," meaning that they come in fits and starts. Speaking of which, there have been quite a few of those fits in recent weeks. Namely:

  • A contract with the Transportation Safety Administration that could be worth as much as $10.8 million over time.
  • $8.4 million in contracts to sell OmniView Gantry and Gemini Parcel scanners to Middle East customers.
  • $2 million in Z Backscatter Van (ZBV) purchases from U.S. Customs and Border Protection.
  • A $2.3 million purchase of ZBVs from a Middle East customer.

That's a total of about two months' worth of sales to AS&E, historically, and they all got announced in the space of less than one month. Things are looking up.

What did we expect out of AS&E last quarter, and what did the news reveal? Find out in:

Fool contributor Rich Smith owns shares of AS&E. The Motley Fool's disclosure policy sees all, shows all.