Top Ranked Industry Groups
Since there are relatively few earnings estimates revisions made during the last half of December, I'm going to focus this week on some of the very best ranked industry groups.
Investors should realize that they don't need to look at just the top 5 or 10 groups to find profitable trades. The top 70-80 industry groups include stocks that are more likely to outperform the broader markets. Furthermore, it is not unusual to find several groups from the same sector within the top third of the industry rankings.
At the top of the Industry Rank List is Food-Flour Grain. This group contains just one stock, Archer Daniels Midland Company (ADM - Snapshot Report). And since ADM is a Zacks #1 Rank ("strong buy") stock, the group has a perfect industry rank of 1.0. (The industry rank is simply the average Zacks Rank for all stocks within a specific industry group.)
In early November, ADM reported record first-quarter profits of $1.63 per share. The results bested expectations by 93 cents. In response, brokerage analysts raised their fiscal 2009 forecasts by nearly a dollar, to $3.40 per share.
The primary theme for convenience stores is an improvement in gasoline margins. As the cost of gasoline has dropped, these companies have been able widen the difference between what they pay for fuel and what they are able to sell it at.
Offsetting this improvement, however, are weakening consumer sales. As a result, the improvement in profit forecasts is not as a strong as it might otherwise be. Nonetheless, the fiscal 2009 consensus estimate of $1.85 per share for The Pantry, Inc. (PTRY - Snapshot Report) is 31 cents higher than it was two months ago.
Medical-Wholesale Drug/Sundries
This group contains 3 Zacks #1 Rank stocks, including Allion Healthcare, Inc. (ALLI - Analyst Report).
For those of you who don't mind a relatively thinly traded stock - average daily volume is just 53,000 shares - ALLI might be worth a look. The company provides services to HIV and chronically ill patients. Third-quarter sales for the company's legacy HIV segment rose 10% in the third-quarter, while the acquisition of the Specialty Infusion segment helped pushed overall growth higher.
During the past 30 days, 1 of the 3 covering brokerage analysts raised both his 2008 and 2009 earnings forecasts. The revisions led to a penny increase in the consensus earnings estimate for both years to 43 cents and 49 cents per share, respectively.
A notable standout in this group is Nash Finch Company (NAFC - Analyst Report). The food distribution company enjoyed third-quarter sales growth of 5%. The company has signed up new customers and increased sales to military commissaries in the U.S. and Europe.
Though earnings estimates have been trending down for 2008, forecasts for 2009 continue to rise. During the past 60 days, the 2009 consensus earnings estimate has moved 16 cents higher to $3.84 per share. NAFC is a Zacks #1 Rank stock.
Zacks Premium and Zacks Elite subscribers can view the Zacks Industry Rank List at http://www.zacks.com/zrank/zrank_inds.php. This interactive list allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. Shown below is the Zacks Sector Rank List, which shows the trend in estimate revisions on a broader scale.
| Sector Rank as of Dec 31 | ||||||
| Sector | This Week's Zacks Rank | Last Week's Zacks Rank | FY09 Revisions Ratio | FY09 Estimates Revised Up | FY09 Estimates Revised Down | FY08 Revisions Ratio |
| Medical | 2.57 | 2.55 | 0.42 | 121 | 289 | 0.39 |
| Business Services | 2.85 | 2.86 | 0.11 | 10 | 91 | 0.22 |
| Aerospace | 2.90 | 2.93 | 0.50 | 19 | 38 | 0.41 |
| Computer and Technology | 2.91 | 2.90 | 0.09 | 90 | 994 | 0.14 |
| Utilities | 2.94 | 3.01 | 0.24 | 29 | 122 | 0.52 |
| Consumer Discretionary | 3.00 | 2.99 | 0.27 | 52 | 195 | 0.27 |
| Transportation | 3.10 | 3.12 | 0.16 | 47 | 302 | 0.22 |
| Consumer Staples | 3.10 | 3.11 | 0.23 | 40 | 175 | 0.33 |
| Construction | 3.15 | 3.20 | 0.10 | 7 | 73 | 0.16 |
| Finance | 3.16 | 3.18 | 0.10 | 97 | 950 | 0.18 |
| Retail-Wholesale | 3.17 | 3.16 | 0.15 | 53 | 361 | 0.25 |
| Industrial Products | 3.20 | 3.19 | 0.07 | 16 | 238 | 0.09 |
| Oils-Energy | 3.24 | 3.21 | 0.10 | 66 | 668 | 0.20 |
| Basic Materials | 3.32 | 3.30 | 0.06 | 20 | 327 | 0.09 |
| Auto-Tires-Trucks | 3.40 | 3.55 | 0.01 | 1 | 85 | 0.06 |
| Conglomerates | 3.70 | 3.70 | 0.01 | 1 | 89 | 0.01 |
Charles Rotblut, CFA, is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.