Golf apparel maker Cutter & Buck (NASDAQ:CBUK) will report third-quarter 2007 results on Thursday, March 8.

What analysts say:

  • Buy, sell, or waffle? Three analysts cover Cutter & Buck, and while their opinions on prospects have been waning, two still rate it a buy while one says hold.
  • Revenue. Sales are expected to essentially be flat, with quarterly revenue forecast to come in at $31.97 million, up just 2.3% from last year.
  • Earnings. Profits, on the other hand, are expected to remain flat at $0.04 per share.

What management says:
Cutter & Buck is a different company this quarter than it was a year ago. Last year, it had just installed a new CEO and was clearing out discontinued merchandise at significant discounts, which drove sales 29% higher. We can't count on that kind of growth this time around, though it seems analysts are aiming low. Sales in the first half of the year grew 14%, and management says it expects sales to continue to grow, albeit at a lower rate.

The number of rounds of golf played ticked up slightly in 2006, after several years of declines. That, coupled with Cutter's better penetration of specialty retail stores, a full quarter of catalog sales, and management's belief that it "continue(s) to anticipate year-over-year sales growth," makes you wonder why analysts seem to have lumped it in with declining Ashworth (NASDAQ:ASHW).

What management does:
All the discounting that Cutter & Buck undertook last year ate into margins, and it's only just begun to right them. Management expects margins to remain in the 44% to 48% range, but with the discontinued lines cleared out of inventory and fresh stock in its place, margins should tend toward the middle to high end of that range.

Margin

10/05

01/06

04/06

07/06

10/06

Gross

46.3%

46.0%

45.4%

45.2%

45.8%

Operating

4.7%

5.4%

6.1%

6.1%

7.5%

Net

4.4%

4.9%

4.8%

4.6%

5.6%
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:
Shaft and club makers like Aldila (NASDAQ:ALDA) and Callaway (NYSE:ELY) have been reporting declining numbers. Fortunately, Cutter & Buck has put in place a number of programs that should help it continue to grow, even as the overall golf industry looks flat to slightly off. Although still relying on the golfing set to sell clothes, those who simply want to look the part are now able to access Cutter's lines through multiple channels. The company has $25 million in cash in the bank, still has no debt, pays a $0.07 quarterly dividend, and generated more than $6 million in free cash flow in the first half of the year -- more than the $5.6 million in cash earnings it had produced at this time last year. It wouldn't surprise this Fool if Cutter & Buck surprises the analysts next week.

Related Foolishness:

Cutter & Buck has earned a five-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice by joining today. It's free!

It was also featured in Motley Fool Hidden Gems as a "Tiny Gem," micro-cap growth prospects that are just too small to win a formal recommendation. Check out all of the market-beating selections with a 30-day trial subscription.

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