Motley Fool Stock Advisor pick Daktronics (NASDAQ:DAKT) is not what you'd call a "beautiful line" kind of a company. In the business of selling the crowd-pleasing, mega-super-duper large screen monitors used at sporting events, you can't really expect to be selling at least X units per month, month after month, with unit volume increasing steadily over time. No, sales are going to be lumpy with this one, and earnings likewise.

Witness yesterday's earnings report. Both quarterly and year-to-date, Daktronics' numbers will disappoint anyone looking for a consistent upward trend (Wall Street, for example, which knocked 4% off of the company's market cap yesterday). For the second quarter of fiscal 2005, sales inched upward in comparison with the Q2 2004 numbers, but earnings declined 23.5% to $0.26 per diluted share. Year-to-date sales are up 10.3% over last year's first half; but again, earnings headed the other way, dropping 7.3% to $0.51 per diluted share.

Daktronics explained the decline in earnings as arising from a fortuitous confluence of circumstances (such as cheap raw materials) boosting its margins last year, which had not been expected to recur this year. And that expectation was fulfilled. For Q2 2004, Daktronics racked up operating margins of 19%; for Q2 2005, that declined to 13%. Similarly, for the year to date, last year's first half saw operating margins of nearly 17%, while this year again, the number was closer to 13%.

The company warned that operating margins will continue to deteriorate in the third quarter but probably not fall below 8%. Perversely, this should produce better comparative results than last year's $0.13 in third-quarter diluted EPS, so the company is predicting earnings of $0.16 to $0.22 for Q3 2005.

For the year, Daktronics is playing it safe, saying only that it expects to earn more this year than last year's $0.89 per diluted share. With $0.51 already in its wallet, and roughly $0.19 on the way next quarter, that means that Daktronics needs only to earn $0.20 in Q4 to meet its goal. In last year's Q4, of course, it earned $0.21, so Daktronics is really setting the bar low for itself this year -- technically, it can turn in another quarter of declining comparative earnings and still fulfill its promise.

Of course, the Street is projecting $0.97 for full-year 2005, and to make that goal, Daktronics will need to boost earnings by nearly 30% over Q4 2005. Tune in again in six months to see how this cliffhanger plays out, Fools. Same Dak-time, same Dak-channel.

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Fool contributor Rich Smith used to own shares in Daktronics but doesn't anymore.