Over the last four quarters, Motley Fool Hidden Gems recommendation Marine Products (NYSE:MPX) has met analyst expectations twice, missed them twice more, and beaten them not at all. Can the boat-maker break its losing streak and chalk one up in the win column when it reports third-quarter 2006 earnings Wednesday morning?

What analysts say:

  • Buy, sell, or waffle? Four analysts still follow Marine Products. All of them now say hold.
  • Revenues. On average, they're looking for a 1% sales decline to $64.3 million.
  • Earnings. But a 17% decline in profits to $0.15 per share.

What management says:
Management's announcement earlier this month that it had repurchased 91,116 shares proved just the catalyst needed to get this stock off to the races. When the news broke, the stock leapt nearly 10% in response. It's given back some of those gains in the days since, however, as investors warily eye Wednesday's news.

Why is Marine Products buying back its shares? After all, CEO Richard Hubbell didn't sound particularly optimistic about the firm's short-term prospects last quarter, citing "the trend of lower retail demand." On the other hand, he did note that the firm has increased its average selling price by virtue of a shift in "product mix" -- i.e., lower-margin boats may not be selling as well, but higher-margin boats are doing fine, raising the price of the "average" boat sold. And he characterized both dealer inventories and order backlog as being in "reasonable shape." I suspect he thinks the pessimism about the company is a bit overdone.

What management does:
Perhaps overdone -- but not without basis. Both rolling gross and operating margins have been falling at Marine Products for well over a year, and after climbing initially, rolling net margins have fallen in each of the last three quarters.

Margins %

3/04

6/05

9/05

12/05

3/06

6/06

Gross

26.1

26.0

25.8

25.4

24.9

24.0

Op.

14.2

14.0

13.8

13.1

12.5

11.6

Net

9.5

9.6

9.9

9.6

9.3

8.9
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:
The clearest truism of the market, and the one I think is most often overlooked by investors, is that for any given company, at any given price, some people cry "buy" while others -- looking at the same facts -- shout "sell." Last week, some investors saw Google (NASDAQ:GOOG) report 92% earnings growth and couldn't help but get a piece of that action. Others focused on the fact that those profits were a hair below consensus estimates, panicked, and sold. Likewise, Apple (NASDAQ:AAPL) bulls look at the success of the iPod as just a taste of what's to come, while Apple bears look at the same numbers, think "it can't possibly get any better than this," and take their winnings off the table.

The same is true with Marine Products and the 91,000-share buyback that set the stock to rallying this month. Last quarter, I looked at a smaller buyback update from the company (16,000 shares) and declared it "only the barest attempt at window-dressing." With over $44 million in the bank, and zero debt, management clearly could have bought back more -- and as I argued, would have bought back more if it thought its stock significantly undervalued. So when the trumpets blared and investors cheered, but Marine Products unfurled yet another whimper of a buyback a few weeks ago, I headed for the door instead.

Why? Same reason as I cited last quarter. 91,000 shares amounts to a bare 0.2% of the company's shares outstanding. When a firm has the cash on hand to buy back as much as 11% of its stock, but makes a token gesture instead, that tells me the buyback is only for show. For the sake of those who still own the stock, I hope I'm wrong. Hopefully, on Wednesday, the company will either announce a bumper crop of profits, or that it's rethought its stingy buybacks of yester-quarter and decided to buy back shares en masse. But I'm not optimistic.

Main Competitor:

  • Brunswick Corp (NYSE:BC)

Suppliers:

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

What's going on with the nation's pleasure boat builders? Find out in last month's "Boat Makers See Shoals."

Marine Products is a Hidden Gems selection. Garmin is a Stock Advisor pick. Try out these or any of our other Foolish newsletters for yourself, free for 30 days.

Fool contributor Rich Smith no longer owns shares of Marine Products. The Fool has a disclosure policy.