Pop quiz: Bones are to the body as what are to the prices of a company's stock?

Answer: earnings reports. Press releases, analyst upgrades and downgrades, even the general state of the economy help to flesh out a company's prospects, but what really gives them form and structure is the information contained in these quarterly status reports. Speaking of which, bone specialist Biomet (NASDAQ:BMET) is due to release its own report (on fiscal Q3 2006) tomorrow morning. Here's what you need to know to make sense of it.

Wall Street Wisdom:

  • General consensus. Twenty-five analysts track Biomet. Of these, nine rate the stock a buy, two a sell, and 14 a hold.
  • Revenues. Consensus among these analysts calls for Biomet to report a 7% increase in quarterly sales tomorrow, to $516.3 million.
  • Earnings. Profits are expected to rise 8% to $0.43 per share.

Margin watch:
As we head into tomorrow, Biomet is riding three consecutive quarters of rising margins, after seeing its margins fall across the board in the three previous quarters. The good news: The rise has been greater than the fall, and as a result, rolling gross, operating, and net margins today are all higher than they were 18 months ago.

Margins %

8/04

11/04

2/05

5/05

8/05

11/05

Gross

71.5

71.4

71.3

72.9

73.1

73.2

Op.

30.5

30

29.5

31.8

31.9

32

Net

18.4

18.2

18

18.7

20.3

20.4
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
In recapping Biomet's fiscal Q2 results three months ago, CEO Dane Miller highlighted strong growth in essentially every business segment but "spinal," "fixation," and "other." He characterized the company's performance as "market leading" (in bone reconstructive products), and seemed to think the only real threat to fiscal Q3 profits would be foreign exchange risk, should the U.S. dollar continue to appreciate. Of course, the flip side of that risk is added profits for Biomet if the dollar falls in future quarters. Either way, investors can see tomorrow whether this was the only "threat," and what effect it had on the company's quarterly results.

Competitors:
Biomet's competitors -- the market that Biomet claims it is leading -- include Stryker (NYSE:SYK), Medtronic (NYSE:MDT), and Zimmer (NYSE:ZMH).

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