For the first time in a year and a half of trying, Mine Safety (NYSE:MSA) reported positive profits growth last quarter. Now let's see if it can repeat that feat when it reports its third-quarter 2007 numbers Thursday morning. 

What analysts say:

  • Buy, sell, or waffle? Six analysts follow Mine Safety, giving it three buy ratings, a pair of holds, and one sell.
  • Revenue. On average, they expect to see 13% sales growth to $237.4 million.
  • Earnings. Profits are predicted to leap 38% to $0.47 per share.

What management says:
As you may recall, Mine Safety reported an unexceptional quarter back in July. About the only thing of real note was that, as mentioned above, it marked a return to profitable growth for the company. CEO John Ryan called this return to growth "encouraging, considering the continuing sluggishness in SCBA sales to the fire service market as customers wait for the implementation of the new NFPA [National Fire Protection Association] standards that all manufacturers must meet by August 31, 2007." But Ryan also warned investors to expect that Mine Safety's customers -- which include well-known names like Home Depot (NYSE:HD) as well as the less ubiquitous Airgas (NYSE:ARG) and United Rentals (NYSE:URI) -- won't begin buying new equipment in earnest until "later in the year or early 2008."

Which reminds me -- this year's getting a little long in the tooth.

What management does:
Meanwhile, margins continue to drop down the shaft. Rolling operating and net margins have both been dropping for well more than a year. The rolling gross margin has declined in each of the last three quarters.





























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:
Perversely, part of the reason for the decline in margins is also the reason that Mine Safety returned to growth last quarter -- the firm's new business selling body armor, which competes with more armor-centric firms like BAE's Armor Holdings, Point Blank, and Ceradyne (NASDAQ:CRDN).

So to get both sales growth and margins growth, we're still sitting right where we've sat for the last several quarters: on a park bench, reading the newspaper, hoping to hear that the government has gotten its rear in gear and (1) approved the new NFPA standards and (2) released the long-awaited Federal Government Assistance to Firefighters Grants. Only then can we expect Mine Safety's more profitable commercial fire safety equipment business to really pick up.

The good news? According to Ryan: "The entire market for breathing apparatus in North America will be priced at a higher level than that of SCBA that meet the previous NFPA standard." So when growth and margins pick up, they should do so in spades.

Take a peek at our Motley Fool Hidden Gems portfolio to find out about companies like Mine Safety. The service is free for 30 days.

What did we expect out of Mine Safety last quarter, and what did it produce? Find out in:

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.