Don't expect aesthetic laser maker Cutera (NASDAQ:CUTR) to burn up the growth charts when it reports first-quarter 2007 financial results on Monday, May 7. It's already said it has charred the forecasts it gave in January.

What analysts say:

  • Buy, sell, or waffle? Despite warning that it hasn't been able to sell many lasers even after settling its patent infringement lawsuit with Palomar Medical Technologies (NASDAQ:PMTI), five of the six analysts covering Cutera still rate it a buy. One says hold.
  • Revenues. Analysts have ratcheted back their expectations to match management's warnings and predict 10% growth to $23 million.
  • Earnings. Profits, as well, have been scaled back, but they're still expected to leap 58% to $0.19 per share.

What management says:
President and CEO Kevin Conners says that despite the anticipated shortfall in revenues, the laser maker will still be able to grow. "This quarter's shortfall was due primarily to lower than expected productivity levels of our recent sales expansion. We are implementing specific initiatives to address this matter and remain confident in our ability to increase our revenue growth." Since opportunities in the aesthetic laser market continue to expand, Cutera believes it can capture a good portion of it even if it seems that most of the growth is happening at Palomar and Syneron (NASDAQ:ELOS).

What management does:
Profits had been fairly consistent for Cutera until it settled the patent infringement lawsuit with Palomar, which then caused it to have to pay out royalties to its rival, while at the same time incurring higher administrative expenses. Even so, going forward, margins should increase even with the lower anticipated revenues coming in. Cutera hopes to use expansion in international markets as a way to grow, although it may very well have been those markets that caused Cutera to announce the reduced guidance.

Margins

12/05

03/06

06/06

09/06

12/06

Gross

73.8%

73.8%

73.5%

70.8%

70.9%

Operating

22%

23%

23.9%

16.9%

21.2%

Net

18.3%

16.5%

1.9%

0.9%

2.1%
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:
While it's true that the aesthetic laser market has been growing, it's been left to the innovative laser makers to make the really big advances. With Cutera's CoolGlide laser now required to fork over royalties and license fees to Palomar, it remains to be seen whether it can continue to be an innovative, growing company whether here or abroad. Although also in the crosshairs of Palomar, it seems Candela (NASDAQ:CLZR) gave up the ghost in being innovative long ago. Its growth has been impaired for awhile now, and it remains to be seen if it can recapture its former glory. The international markets proved tough for Candela in this latest quarter, and next week's earnings report will show whether that has been because Cutera was able to gain there or if it borrowed Candela's shrinking ray gun.

Related Foolishness:

Cutera has earned a four-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock-rating service by joining today. It's free!

Syneron is a recommendation of Motley Fool Rule Breakers. A 30-day trial subscription lets you hone in on the reasons this laser maker might singe all the others.

Fool contributor Rich Duprey owns shares of Candela but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.