Thursday - June 7, 2007
Want to view the archive of past issues? Click here.
Manage Profit from the Pros subscription:
1. ZACKS RANK BUY STOCKS
Zacks #1 Ranked stocks average a 31.8% annual return. Every day on Zacks.com we highlight four new Zacks Rank Buy stocks. Each individual stock is chosen based on how well they match the criteria for the four main schools of investing: Aggressive Growth, Momentum, Growth & Income and Value.
Aggressive Growth – Aspreva Pharmaceuticals Corporation (ASPV)
Listen to the audio podcast on ASPV through Zacks' NEW Audio Feature
Aspreva Pharmaceuticals Corporation's (ASPV) recent first-quarter results continued the trend of solid outperformances for the company. It has comfortably exceeded earnings estimates in seven out of the past eight quarters, while meeting estimates in one. Over the past month, this year's estimates have jumped 25 cents to $3.88 per share, while next year's numbers have soared 85 cents to $5.46 per share. The stock is trading at a very cheap 3.7x next year's estimates. Read the full analysis on ASPV now!
Sun Life Financial, Inc. (SLF) exceeded analysts’ earnings expectations for eight consecutive quarters by an average margin of 11.5%. In early May the company reported record first-quarter profits of 96 cents per share. SLF has enhanced shareholder value through both share repurchases and dividend payments. The company has a current and five-year average dividend yield of 2.46%. Its return on equity tops that of the industry average—15% compared to 10%. Read the full analysis on SLF now!
Momentum – Questar Corporation (STR)
Questar Corporation (STR) continues to trend higher after surpassing resistance in early April. The company’s track record of earnings surprises and revised guidance should continue to support the underlying trend going forward. Read the full analysis on STR now!
Magna International, Inc. (MGA) reported first-quarter earnings per share of $1.96 which easily surpassed the consensus estimate of $1.33. Revenues came in at $6.4 billion—a record for the company. Analysts have been upping their profit forecasts for this Zacks #1 Rank stock. MGA has a price-to-book ratio of 1.5, compared to 4.6 for the market and 2.2 for the industry. Read the full analysis on MGA now!
2. Best of the Zacks $100,000 Challenge
Zacks is conducting a nationwide talent search to find the very best stock pickers. The winner gets a $100,000 dream job with Zacks! . Sign up for free to join the competition, or just read what stocks the leading players are trading on the Zacks Challenge Player Blogs.
Here's what the leading players are saying lately:
MackTheKnife (Rank #48 with $139,729)
ANIKA’S BREAKOUT WARMS ADMIRERS’ HEARTS (ANIK)
Java J (Rank #40 with $142,195)
>> JAVA’S MARKET MUSINGS #67 <<
Jason Heming (aka: Waldoe) said his style of investment is a “mish mash of fundamental, momentum, and swing trading.” From a fundamental standpoint, this eclectic player is on the look out for companies that are about to turn the corner. “Maybe they were close to bankruptcy or had a bad run recently. So I'm not necessarily looking for companies with great fundamentals but rather fundamentals that have a reversing trend,” noted Jason. “Momentum plays a much bigger role in my search of good investment candidates. Again I'm looking for companies that have had a "bad run" but the trend has turned upwards over the past 2 to 3 months. I also want volume to support this trend. I want to see significant volume on up days and lower volume on down days. I also look at the 50 and 200 day moving averages. I want the stock to have passed both these trend lines so as to provide support if the stock breaks down suddenly. Finally, I do look at chart patterns, but not in great detail.”
This contestant’s ability to stay diverse and agile when it comes to trading stocks has placed his Zacks $100K Challenge portfolio among the top competing players with an overall return of about 42% since the beginning of this year.
Some of the names that can currently be found in this challenger’s Simulator portfolio include Rhodia SA (RHA), CMGI Inc. (CMGI), SmartPros Ltd. (PED), Charter Communications Inc. (CHTR) and Autobytel Inc. (ABTL). Take a look at his entire trading history by clicking here.
3. ZACKS EQUITY RESEARCH
Listen to the audio podcast of the Industry Rank Analysis through Zacks' NEW Audio Feature.
Handling products is not something that normally grabs investor interest, but given some recent data, perhaps it should.
Last week, Columbus McKinnon (CMCO) reported fourth-quarter profits of 57 cents per share, up from an adjusted 52 cents per share last year. CMCO, which makes hoists, cranes, lift tables and other handling systems, experienced both sales growth and margin expansion. The backlog was higher as well. Two of the three covering brokerage analysts have raised their forecasts on the stock, sending the fiscal 2008 consensus estimate five cents higher to $2.09 per share.
This Thursday, after the close, Cascade Corporation (CAE) is scheduled to report its fiscal first-quarter results. CAE matched expectations last quarter, but beat expectations during each of three previous quarters. Brokerage analysts have also been raising their forecasts for fiscal 2008. The current consensus estimate calls for fiscal 2008 profits to total $4.04 per share, a positive revision of 29 cents from 60 days ago. CAE makes load handling products that are used on lift trucks and sales of lift trucks have been strong in both Europe and Asia – a reflection of economic growth.
More. . .
CAE and CMCO are Zacks #2 Rank stocks. Both companies are classified in Machinery-Material Handling.
This group also contains one more company, Key Technology (KTEC). KTEC is a Zacks #2 Rank stock, but makes automation systems for the food industry. The company might be of interest for two reasons. First, CEO David Camp credited the increased focus on food safety and labor shortages in the food industry for helping his company to increase earnings. Second, the sole brokerage analyst who covers the stock has adjusted his full-year profit forecast by 22 cents over the past 60 days to 90 cents per share.
Cummins (CMI) may seem like an unlikely global-warming play, but the company is experiencing higher demand for what it describes as “emissions-related products and technologies”. Specifically, filtration and exhaust treatment technologies appear to be an area of growth for CMI. On the flip side, new regulations in the U.S. have resulted in a decline in truck sales this year and thereby lower demand for truck engines, which CMI makes. Several trucking companies accelerated their purchase plans last year before the regulations took effect.
Nonetheless, the outlook for CMI appears to be positive. Worldwide economic growth and increased demand for portable generators and auxiliary power units are contributing to the bottom line. CEO Tim Solso expects CMI to earn between $6 and $6.50 per share this year. Brokerage analysts have been raising their forecasts on the stock, with one analyst revising his projections within the last seven days. The consensus earnings estimate of $6.41 per share is 14 cents higher than a month ago and $1.09 higher than 60 days ago.
CMI is a Zacks #1 Rank stock. Because CMI is the lone company in Engines-Internal Combustion, the group’s Industry Rank matches the company’s Zacks Rank. (Industry Rank is calculated by averaging the Zacks Rank for all companies within a group. Groups with a smaller number of companies may have more volatile Industry Ranks and may be more likely to appear near the very top or very bottom of the Industry Rank List.)
To read the complete Industry Rank Analysis, click here.
Charles Rotblut, CFA is the senior market analyst for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Equifax (EFX), Onyx Pharmaceuticals (ONXX), Newfield Exploration Co. (NFX) and Allied Irish Bank (AIG). To see their latest posts, click here.
Listen to the audio podcast of Earnings Trends through Zacks' NEW Audio Feature.
4. PROFIT TRACKS
Zacks.com is proud to share with you some of the best trading
strategies that truly allow you to Profit from the Pros. Today
Profit Tracks: High Rank Value
Two of the most commonly accepted measures of a value stock are a price-to-earnings (P/E) multiple of 15.0 and a price-to- book (P/B) multiple of 3.0. Although many studies have shown performance advantages to investing in value stocks, not all value stocks are actually bargains. A value a stock is only a good buy if earnings are expected to improve in the future. High Rank Value is a strategy designed to find the true bargains among value stocks. By requiring a Zacks Rank of #1 ("Strong Buy") or #2 ("Buy"), this strategy restricts the pool of value stocks to only those with positive revisions in earnings estimates. In other words, profits are expected to improve in the future at a faster pace than originally anticipated.
Asbury Automotive Group, Inc. (ABG), which recently declared a quarterly dividend of 20 cents per share, reported first-quarter results in late April. Adjusted income from continuing operations of 45 cents topped the consensus estimate by 7% and exceed the year-prior total of 41 cents. Asbury Automotive offers a price-to-earnings (P/E) multiple is 13.75 and a price-to-book (P/B) multiple of 1.60. Continue your research on ABG now!
Books-A-Million, Inc. (BAMM) recently declared a special one-time dividend of $3.00 per share. In late May, the company posted first-quarter earnings of 13 cents per share, eclipsing the year-ago result of nine cents and surpassing the consensus estimate by 8%. Net sales increased 2.1% on a year-over-year basis. BAMM has a price-to-earnings (P/E) multiple is 14.22 and its price-to-book (P/B) multiple is 1.75. Continue your research on BAMM now!
Harleysville Group, Inc. (HGIC) sports a price-to-earnings (P/E) multiple of 11.08 and a price-to-book (P/B) multiple of 1.31. The company recently declared a regular quarterly dividend of 19 cents per share, which was its 84th consecutive quarterly dividend since the company went public in 1986. In late April, HGIC released first-quarter earnings of 70 cents per share, outpacing the consensus estimate by a penny and exceeding the year-ago result. Continue your research on HGIC now!
Innkeepers USA Trust (KPA) announced first-quarter adjusted funds from operations (FFO) of 30 cents per share in early May. The result was ahead of the consensus estimate by a penny and improved on the year-ago total of 27 cents. The company mentioned that it continued to see healthy margin growth despite high utility and insurance costs. KPA satisfies the criteria for this Profit Track as evidenced by its price-to-earnings (P/E) multiple of 13.77 and a price-to-book (P/B) multiple of 2.14. Continue your research on KPA now!
To see the full list of stocks that currently pass this winning screen, click here.
All the Profit Track strategies were created and backtested using the Research Wizard software from Zacks Investment Research. If you like this screening strategy, but want to narrow down the list of stocks and even improve the performance, then you should start a free trial to this powerful stock picking tool. Learn more about the Research Wizard free trial offer and our new special report “Top 10 Stock Screening Strategies”.
Listen to the audio podcast of the Screen of the Week through Zacks' NEW Audio Feature.
Kevin Matras explains why monitoring stocks is as important as picking them: Click here.
5. ZacksElite.com TIMELY BUY of the WEEK
Here you'll discover a Zacks #1 Rank stock hand selected by Ben Zacks to outperform the market over the next 30 to 90 days. This week's Timely Buy is...
Priceline.com (PCLN) recently raised its outlook for gross travel bookings. Discover the latest forecast and check out its first-quarter results.
Priceline.com (PCLN) is a travel service that offers leisure airline tickets, hotel rooms, rental cars, vacation packages, and cruises. The company operates as priceline.com, rentalcars.com, breezenet.com, and lowestfares.com.
The company’s Name Your Own Price service (also called its opaque business) offers customers a unique value proposition by allowing them to name their own price for online products/services. In these transactions, Priceline.com determines the price it will accept and has discretion in supplier selection. PCLN’s value-add to suppliers is that Priceline.com provides a brand preserving sales service that enables them to sell excess inventory without harming their existing retail pricing structure.
Priceline.com also has a more traditional travel sales model that allows customers to choose specific suppliers and inventories. Under the retail model, Priceline.com acts as an agent for the airline, hotel or rental car company and the supplier is the merchant of record. The company was founded in 1997 and went public in March 1999.
The company recently increased the high end of its guidance for 2007 gross travel bookings to $4.25 billion. PCLN’s previous full-year 2007 outlook stood at $4.1 billion to $4.2 billion. Priceline.com also reiterated its full-year 2007 pro forma net income projection of $2.90 to $3.10 per share.
In early May, Priceline.com release results for the first quarter. Gross travel bookings, which refers to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, moved up 33.7% on a year-over-year basis. GAAP revenues were up 24.6% from the previous year’s first quarter. Pro forma net income also improved year-over-year and topped the consensus estimate.
"First quarter pro forma earnings growth exceeded our expectations in both the United States and Europe," said priceline.com President and Chief Executive Officer Jeffery H. Boyd. "In Europe, Booking.com benefited from 91% growth in gross travel bookings as we continued to build the business across Europe. In the United States, pro forma earnings growth was driven by 8% growth in merchant gross travel bookings and greater efficiencies in marketing, which cost gross travel bookings, but significantly decreased acquisition costs."
The author of this article owns shares of Priceline.com.
OTHER TOOLS FROM ZACKS
At the heart of Zacks Investment Research is the Zacks Rank investment philosophy that continues to vastly outperform the market. Our Zacks #1 Rank (Strong Buy) List has produced the following results for investors:
And just as importantly, our #5 Ranked stocks (Strong Sells) have alerted investors as to which stocks to dump from their portfolios to avoid unnecessary losses.
FREE PORTFOLIO TRACKER
Do you believe that these events affect stock prices?
If you answered yes, then how are you staying on top of these changes for your stocks? If you are one of the 55,000 investors who wake up every morning to the Daily Portfolio Updates emails from Zacks.com, then you are all set. If not, then sign up now to get this vital information sent to you daily to help take definitive action to improve your portfolio's performance. Did we mention it's free? Get started now!
We hope you enjoyed this issue of "Profit from the Pros", And we look forward to visiting with you again next week.
If you enjoy this e-mail newsletter, then please pass it along to a friend. Simply forward them the link below to sign up for their own free subscription. If you're reading a forwarded copy, sign up for your own, so you get this wealth of information every week. Just click here. THANKS!
Regards and Happy Investing,
Charles Rotblut, CFA
p.s. What is the mission for Zacks Profit from the Pros? Click here to find out how we will help you become a more successful investor.
*Zacks Rank performance is the total return (price changes + dividends) of equal weighted portfolios, consisting of those stocks with the indicated Zacks Rank, assuming zero transaction costs. These returns are not the result of a backtest; these are actual returns since 1988. The stocks in the Zacks Rank portfolios were available to Zacks clients before the beginning of each month (monthly rebalancing). Performance results from 1988 through September 2006 are based on a subset of all Zacks Rank stocks that excludes stocks covered by only one analyst and ADR’s.
The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
To contact us by mail:
Zacks Investment Research
To unsubscribe from receiving "Profit from the Pros" e-mail newsletter, click here.