Monday - July 16, 2007
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This is going to be a very busy week for the markets. Nearly one-fifth of the companies within the S&P 500 are going to report second-quarter earnings, many of which are also Dow components. The economic calendar is packed and includes both the June PPI and CPI reports. Fed Chairman Ben Bernanke is scheduled to provide his “Humphrey-Hawkins” testimony before Congress. And July options contracts expire on Friday.
Overall, I expect the earnings news to be better than expected and for the markets to react accordingly. The one wildcard, however, is that we will see reports from about 80 banks. This could push subprime issues and mortgage default rates to the forefront. As a result, the week will not be without risks. However, with the Dow in record territory, sentiment is clearly bullish.
Wishing you prosperity,
1. ZACKS RANK BUY STOCKS
Zacks #1 Rank stocks average a 31.9% 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 - Given Imaging (GIVN)
Given Imaging (GIVN) has innovative proprietary technologies
that are in demand with customers. Its large potential markets
have investors excited about the company's prospects, which in
turn has led to a premium multiple being awarded to the stock.
Earnings have exceeded estimates in three out of the past four
quarters, with two of them posting 100%+ positive surprises.
Over the past month, next year's estimates have increased a
nickel to 49 cents per share. Read the full analysis on GIVN now!
Growth & Income - PepsiCo, Inc. (PEP)
PepsiCo, Inc. (PEP) exceeded analysts’ earnings expectations
in four out of the past five quarters. The company recently
raised its full-year profit guidance to between $2.02 and
$2.07 per share. On May 2, the Board of Directors boosted its
annual dividend by 25% to $1.50 per share from $1.20. PEP is
currently yielding 2.3% and has a five-year average dividend
yield of 1.7%. Its return on equity is quite impressive at
33%. Read the full analysis on PEP now!
Momentum - Diana Shipping Inc. (DSX)
Diana Shipping Inc. (DSX) continues to trend higher on strong fundamentals in the dry bulk industry and increasing full-year estimates. The stock is currently trading above technical resistance on stronger-than-average volume. Read the full analysis on DSX now!
Value - Transatlantic Holdings, Inc. (TRH)
Transatlantic Holdings, Inc. (TRH), a Zacks #1 Rank stock,
exceeded analysts’ earnings expectations in six out of the
past seven quarters. On May 24, the Board of Directors raised
its quarterly cash dividend by 18.5% to 16 cents per share.
TRH has a current dividend yield of 0.71%. The company has a
price-to-book ratio of 1.6, compared to 4.6 for the market. Read the full analysis on TRH now!
Zacks Rank Resources
2. 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: Earnings and Margins
This Profit Track goes to the heart of fundamental investing by finding companies with healthy earnings. The main ingredients are the search for Earnings Growth and Net Profit Margins. Then for good measure we make sure earnings estimates are moving higher which is a strong indicator of future performance and that brokerage firms are positively rating the stockse characteristics can result in high-dollar returns.
Here are four stocks that make the grade for the Earnings and Margins Profit Track:
Hardinge Inc. (HDNG) sports earnings per share growth of 100% for the most recently completed year, versus the year-prior. The company offers a net margin of 0.04. On Jun 28, Hardinge was selected for inclusion in both the Russell 2000 and Russell 3000 indices. In early May, this Zacks #1 Rank stock reported first-quarter earnings of 60 cents per share, up from 22 cents in the year-ago period and 16 cents above expectations. Continue your research on HDNG now!
Globecomm Systems Inc. (GCOM) reported fiscal third-quarter earnings of 14 cents per share in early May. The results matched the consensus estimate and outperformed the year-ago total. Sales increased 10.2% to $39.11 million from the prior year quarter. GCOM meets the criteria of this Profit Track as evidenced by its net margin of 0.04 and year-over-year earnings growth of 68.75%. Continue your research on GCOM now!
Mitcham Industries Inc. (MIND)reported first-quarter earnings of 39 cents per share, up from 33 cents in the year-ago period and nine cents above expectations. Revenues soared over 63% to $14.1 million, fueled by increased demand for seismic equipment; development and growth in new geographic markets; and expansion of the company's lease pool. MIND experienced annual earnings per share growth of 16.25% from the year-prior and a net profit margin of 0.19. Continue your research on MIND now!
Yanzhou Coal Mining Co. Ltd. (YZC) saw annual earnings per share growth of 120.2% for the most recent full year, versus the year-prior. The company’s net margin stands at 0.23. YZC has soared over 115% year-to-date, quadrupling the 2006 return of 26.6%. Full-year consensus estimates for 2007 currently stand at $4.58, up from $3.86 three months ago. Continue your research on YZC 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”.
Kevin Matras dispels the magic numbers myth and looks at how to use Relative Valuations for finding undervalued stocks on the move. Read more...
3. ZACKS EQUITY RESEARCH
The second half of July is going to be a news junkie’s dream. The Tour de France is will be heading into the mountains (three category 1 climbs on Monday). Fed Chairman Ben Bernanke will be delivering his semiannual monetary policy report to Congress. June producer and consumer inflation data will be published. And, earnings season will heat up.
Bernanke should testify on Wednesday and Thursday, delivering what is commonly referred to Humphrey-Hawkins. Expectations are for him to say more or less what he has been saying for a while: the economy is growing, inflation remains a risk, and the subprime mess seems to be contained. Following the prepared remarks, several members of Congress are likely to pontificate about mortgages, tax policy and deficits. After all, the cameras will be rolling and next year is an election year. (A text version of Bernanke’s speech will be available on the Federal Reserve’s web site on Wednesday.)
Speaking about the economy, there will be a large amount of data released. The New York Fed’s manufacturing index will be issued on Monday. Tuesday features June PPI, June industrial capacity and utilization data and the July NAHB housing index. June CPI and housing starts will be released on Wednesday. Thursday brings the June leading indicators and the July Phili Fed survey. No economic data is scheduled for release on Friday.
More. . .
As of the morning of Jul 13, we have confirmed scheduled earnings reports from 276 companies for the week of Jul 16 – 20, though the actual number of earnings reports will likely be higher. Approximately one-fifth of the S&P 500 will release their quarterly numbers. Included in this group will be Dow components Microsoft (MSFT), Citigroup (C), Johnson & Johnson (JNJ), Pfizer (PFE), Intel (INTC) and Coca-Cola (KO).
Friday, July 20 is July triple witching (expiration of stock options, index options and index futures), meaning it could be more volatile than normal. The first busy week of earnings season will also feature nearly 80 banking companies, which could place some emphasis on subprime mortgages. On the flip side, positive guidance could keep investors feeling prosperous. It will all depend on whether the focus is on the potential of a credit crisis or earnings growth. Thursday’s rally suggests that sentiment remains bullish.
Companies That Could Issue Positive Earnings Surprises during the Week of July 16 – 20
Delta Air Lines (DAL) realized record load factors in June, including a consolidated system load factor of 85.9%. (Load factor is the ratio of passenger miles to available seat miles. The more crowded a plane is, the higher load factor is.) Two of the seven covering brokerage analysts responded by raising their projections for second-quarter earnings. The consensus estimate now calls for the airline to have earned 57 cents per share, four cents more than the average estimate of 30 days ago. The Most Recent Consensus is more bullish at 62 cents per share. Delta Airlines is scheduled to report on Wednesday, Jul 18, before the start of trading.
About a third of the 22 covering brokerage analysts have raised their second-quarter profit forecasts on Gilead Sciences (GILD) over the past 30 days. The revisions have resulted in a one-cent boost in the consensus estimate to 39 cents per share. The Most Recent Consensus is more bullish at 40 cents per share. The biopharmaceutical company has exceeded expectations during each of the past four quarters. Gilead Sciences is scheduled to report on Thursday, Jul 19, after the close of trading.
Charles Rotblut, CFA, is the senior market analyst for Zacks.com. He can be reached at email@example.com.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Genentech (DNA), CVS/Caremark (CVS), Business Objects (BOBJ) and J.C. Penney (JCP). To see their latest posts, click here.
Listen to the audio podcast of Earnings Trends through Zacks' NEW Audio Feature.
4. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.
Economy Should Remain Strong Through August ‘08
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 Ranked (Strong Buys) have produced the following results for investors:
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To truly take advantage of the Zacks Rank, you need to first understand how it works. That's why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions. Download a free copy now to prosper in the years to come.
Or view the full list of Zacks #1 Ranked stocks at.
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Regards and Happy Investing,
Charles Rotblut, CFA
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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.
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