Can anyone remember the last time LASIK specialist LCA-Vision (NASDAQ:LCAV) tripped over the quarterly earnings hurdle Wall Street set up for it? I can, but I have to cheat and check the records on Earnings.com. The answer is that it's been 18 quarters -- four and a half years -- since LCA let anyone down. Can these guys keep the streak alive when first-quarter 2007 numbers come out Wednesday afternoon?

What analysts say:

  • Buy, sell, or waffle? Seven analysts follow LCA, giving it three buy ratings and four holds.
  • Revenues. On average, they expect to see 19% sales growth to $87.5 million.
  • Earnings. Profits are predicted to rise 5% at $0.64 per share.

What management says:
In April, LCA announced that it will "restate financial results for 2004, 2005 and 2006 to reflect a change in revenue recognition for the Company's separately priced extended warranties." The bottom line effects of the restatement are expected to be a $30 million reduction in shareholders' equity, along with shaving $10 million from last year's profits. In future quarters, the effects will include increased "revenues and earnings in future periods as deferred revenues are amortized back into income."

Unaffected by the change will be cash from operations on the firm's cash flow statement, the size of the $92 million cash hoard on its balance sheet, and 2007 guidance calling for 20% to 25% revenue growth, and $2.05 to $2.15 in earnings per share.

What management does:
Until we see the actual effects of the restatement, it will be hard to say how it affects what we used to think were the trends in profitability at LCA. For the time being, here's what we think is going on:

Margins

9/05

12/05

3/06

6/06

9/06

12/06

Gross

53.2%

53.2%

53.2%

53.8%

53.5%

53.5%

Operating

25.9%

25.6%

26%

26.6%

25%

24.7%

Net

16.8%

16.5%

16.4%

16.5%

15.4%

14.9%
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:
As you can see, gross margins have been relatively stable of late, while rolling operating and net margins have stumbled in the last couple of quarters. The primary culprits here would appear to be the firm's beginning to expense stock options and a 42% increase in selling, general, and administrative expenses (SG&A) in the second half of fiscal 2006, which far outpaced even the firm's 26% sales growth. Reviewing these same numbers when recommending the stock to members of Motley Fool Stock Advisor back in March, co-lead analyst David Gardner noted that they seem to suggest that "LCA hasn't used the most effective marketing, while private ophthalmologists have gotten more aggressive in their messaging."

Logical. If the firm's private competitors (and/or publicly traded TLC Vision (NASDAQ:TLCV)) are getting aggressive, that would depress LCA's sales growth. And if the firm's marketing dollars are being badly spent, that, too, would help to explain why sales growth isn't keeping up with SG&A spending. Obviously, David expects the firm can turn this around. On Wednesday, we'll check in and see how that's going.

For more on LCA-Vision, read:

LCA-Vision is a Motley Fool Stock Advisor recommendation. To see what other companies David and Tom Gardner have recommended to investors since 2002, click here for a 30-day free trial.

Fool contributor Rich Smith does not own shares of any company named above.