Boat maker and Motley Fool Hidden Gems recommendation Marine Products (NYSE:MPX) reports its Q2 2006 earnings tomorrow morning. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Four analysts follow Marine Products. One says buy; one sell; and two hold.
  • Revenues. Analysts are looking for nearly flat year-over-year sales of $77.2 million.
  • Earnings. Profits are predicted to be down 10%, to $0.18 per share.

What management says:
Marine Products takes a "just the facts" approach to its earnings releases. Reporting last quarter, the firm described a decline in sales, exacerbated by higher raw-material costs that eroded the firm's gross margins. CEO Richard Hubbell made no attempt to dress up the quarter's results, preferring instead to just describe management's moves to deal with a bad situation: namely, cutting production "in order to maintain appropriate levels of dealer inventories and order backlog."

According to Hubbell, the worst seems to be behind Marine Products now, production is ramping back up, and the firm's new 2006 model-year boats were well-received commanding higher prices during Q1. Management now aims to "strategically increase its market share and generate superior financial performance."

What management does:
So far, though, the firm's margins don't reflect management's optimism. Viewing the trailing-12-month results, the gross, operating, and net margins all continue on their downward path. In the most recent six-month period (compared to the previous year), sales are down 6%, but cost of goods sold has fallen only 4%, and operating costs have not declined at all.

Margins %

12/04

3/04

6/05

9/05

12/05

3/06

Gross

26

26.1

26

25.8

25.4

24.9

Op.

14.2

14.2

14

13.8

13.1

12.5

Net

9.4

9.5

9.6

9.9

9.6

9.3

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.

The Fool says:
As he does with each and every stock he's picked for Hidden Gems, Fool co-founder Tom Gardner recently updated his thinking on Marine Products in our May issue. (If you missed it, now's a great time to take a peek at the issue for free. Start by clicking here.) Long story short, Tom fears he initially overestimated the firm's growth rate (natch -- since it's shrinking rather than growing), and now suggests that you don't buy the stock above $9 per share.

For the record, Marine Products itself seems to agree with Tom. The firm recently updated investors on its share buyback program. During Q2, Marine Products bought back only 15,707 shares. With the stock averaging about $9 and change during the quarter, that buyback probably amounted to less than $150,000 in cash. When you consider that the company has a good $46 million in the bank, a $150,000 buyback program amounts to only the barest attempt at window-dressing, and suggests management doesn't think its stock worth more than $9, either.

Competitors:

  • Brunswick (NYSE:BC)

Suppliers:

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

Related Companies:

  • RPC (NYSE:RES)

Find more savvy picks from Fool co-founder Tom Gardner with a free 30-day trial subscription to his market-beating Motley Fool Hidden Gems.

Fool contributor Rich Smith owns shares of Marine Products. Garmin is a Motley Fool Stock Advisor pick. The Fool's disclosure policy always stays afloat.