Foolish Forecast: Marine Products Sinking?

Tic-tac-toe, investors want to know: Will boat maker Marine Products (NYSE: MPX  ) make it three in a row for earnings misses when it reports its fiscal Q4 2006 numbers Wednesday morning?

What analysts say:

• Buy, sell, or waffle? Four analysts follow Marine Products. Three of them still say hold, but the fourth has shifted to a sell rating.
• Revenues. On average, they're looking for a 1% rise in quarterly sales to $57.5 million.
• Earnings. Profits are predicted to decline 18% to $0.09 per share.

What management says:
Since reporting earnings back in October (read all about it by clicking here), Marine Products has only made two significant 8-K filings with the SEC. First, it increased its quarterly dividend to $0.06 per share (bringing the firm's dividend yield up to 2.4%). Consider that a reward for investors who have stuck with the stock as it lagged the S&P by 18 points over the last 52 weeks.

And last month, the board approved "discretionary" bonuses for the management team responsible for the stock's laggard ways: $436,000, or roughly 2% of net profits, will be paid out to the top four execs on top of their salaries.

What management does:
Over the past four quarters, it's been one long, uninterrupted slide in margins at all levels. Rolling gross, operating, and net margins are all down. At last report, the firm made 20% less on each dollar of revenue than it did one year ago.

Margins	6/05	9/05	12/05	3/06	6/06	9/06
Gross	26.0%	25.8%	25.4%	24.9%	24.0%	23.2%
Operating	14.0%	13.8%	13.1%	12.5%	11.6%	10.6%
Net	9.6%	9.9%	9.6%	9.3%	8.9%	7.9%

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:
So is it time to abandon this ship? Tom Gardner, who recommended Marine Products to Motley Fool Hidden Gems members back in October 2004, says not necessarily, observing that "things aren't all bad. Leisure and fishing boats are a highly cyclical sector. It's possible we saw the bottom to that cycle this summer when gas prices and interest rates may have peaked."

It's not always easy making money in a cyclical business, but Tom likes management's "strategy of targeting the higher-end purchaser and selling higher-priced boats," calling Marine Products "well-run." He even has a recommended price at which he thinks the stock could offer investors a bargain. To find out what it is, claim your free trial membership to Hidden Gems, which will get you unfettered access to Tom's semiannual review of every stock in the Gems portfolio, Marine Products included.

Main Competitor:

• Brunswick Corp (NYSE: BC  )

Suppliers:

• Garmin (Nasdaq: GRMN  )
• Honda (NYSE: HMC  )
• Sirius Satellite (Nasdaq: SIRI  )

What did we expect out of Marine Products last quarter, and what did it produce? Find out in:

• Foolish Forecast: Marine Products' Shallow Buyback
• Marine Products Hard to Sink

Fool contributor Rich Smith does not own shares of any company named above. Garmin is a Stock Advisor pick. The Fool has a disclosure policy.