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Friday - Aug 3, 2007
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1. ZACKS RANK BUY STOCKS
Zacks #1 Rank stocks average a 32.2% 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 - Business Objects (BOBJ)
Business Objects (BOBJ) has exceeded earnings estimates in an amazing 16 straight quarters. Four analysts have raised their estimates for this year, while six have done so for next year. In just the past week, this year's estimates have increased five cents to $1.69 per share, while next year's numbers have risen 12 cents to $2.08 per share. Analysts expect the company to generate 16% long-term earnings growth. Read the full analysis on BOBJ now!
Tempur-Pedic International, Inc. (TPX)a Zacks #1 Rank stock, exceeded analysts' earnings expectations in eight consecutive quarters. The company boosted its full-year guidance after reporting strong second-quarter results. The Board of Directors recently approved a new $200 million share buyback program. On May 7, the Board authorized an increase in the quarterly dividend on its common stock to eight cents per share from six cents. TPX has a current dividend yield of 1.0%. Read the full analysis on TPX now!
Team, Inc. (TISI) is already up 33% year-to-date and is looking poised to add to those gains. The chart is looking excellent as are earnings estimate revisions. This year's estimates have risen 11 cents to $2.20 per share over the past 60 days. Read the full analysis on TISI now!
Consensus earnings estimates for Humana, Inc. (HUM) exceeded analysts' earnings expectations for the past three quarters, most recently by 16.3% in the first quarter. Consensus earnings estimates for this quarter and for the full year have risen over the past seven days. On Jul 19, the Board of Directors declared a quarterly cash dividend of 41 cents per common share of stock. This Zacks #1 Rank stock has a price-to-book ratio of 2.1, compared to 4.6 for the market and 2.9 for the industry. Read the full analysis on HUM now!
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 we highlight...
Profit Track: Upgrades and Revisions
This strategy focuses primarily on Positive EPS Estimate Revisions and Brokerage Rating Upgrades. Over the last 20 years Zacks Investment Research has proven that earnings estimate revisions are the most powerful force driving stock prices. Studies have also shown that stocks receiving upward EPS revisions tend to receive additional upward revisions in the future. Then consider that stocks receiving these upward revisions generally have brokers upgrading their Ratings, which is also a proven mover of stock prices. There are other parameters to this strategy, but the Rating Upgrades and positive EPS Revisions are the two powerful active ingredients.
Here are four stocks that make the grade for the Upgrades and Revisions Profit Track:
Actuate Corp. (ACTU) recently reported second-quarter GAAP earnings of five cents per share, exceeding the consensus estimate by 25%. Revenues of $34.7 million were 10% higher than year-prior result. The company mentioned that this quarter marked the sixth consecutive quarter of double-digit year-over-year growth for both license revenue and non-GAAP net income. ACTU produced earnings per share growth of 28% over the past five years. Continue your research on ACTU now!
Anixter International, Inc. (AXE), a Zacks #1 Rank (Strong Buy) company, experienced earnings per share growth of 42% over the past five years. The company recently posted second- quarter earnings $1.53 per share, outpacing last year's $1.15 and surpassing the consensus estimate by 18%. Sales increased 22% on a year-over-year basis. Continue your research on AXE now!
Energen Corp. (EGN) recently announced second-quarter earnings of 94 cents per share, improving on the previous year's 67 cents and beating the consensus estimate by 13.25%. The company commented that year-to-date earnings are very strong due to higher realized sales prices and increased production, adding that Energen remains on track to realize its sixth consecutive year of record earnings. EGN boasts earnings per share growth of 33% over the past five years. Continue your research on EGN now!
Rush Enterprises, Inc. (RUSHA), another Zacks #1 Rank (Strong Buy) company, released results for the second quarter in mid- July. Earnings per share of 51 cents jumped ahead of analysts' expectations by 21%. The company satisfies the criteria for this Profit Track as evidenced by its earnings per share growth of 43% over the past five years. Continue your research on RUSHA 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”.
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Kevin Matras goes over a Relative Price Strength strategy for
finding winning stocks in all markets: More...
3. ZACKS EQUITY RESEARCH
We sat down with senior machinery industry analyst Mario Ricchio recently, now that the bulk of his machinery coverage has reported earnings results for the quarter. He gave us his take on the industry as a whole, and what he expects going forward.
How have machinery companies in your coverage been performing this earnings season?
So far within our machinery coverage, second quarter earnings results have been mixed. The bulk of the companies have reported above our expectations, but a few have reported below. Overall, the median growth rate is coming in at 10%. The difference this time around, as opposed to other machinery cycles, is weak U.S machine orders have failed to lead to a series of downward earnings revisions. And it's really a story of a booming global economy driving organic growth. Since the companies we cover, in some cases, have more than 50% of earnings from International operations, it has helped to weather the storm called U.S housing.
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What effect, if any, has the global economy had on the machinery group as a whole?
The strong global economy has been the single, most positive fundamental driver for this group. Machine orders have been strong across the board for industrial, mining and energy- related equipment. Foreign companies and sovereign governments alike are flush with cash from the multi-year surge in commodity prices. They are reinvesting the flow of funds back into infrastructure projects, new construction and mining.
So in effect, what we're seeing is a commodity boom feeding into general construction spending globally. When we look at the numbers, machinery company sales, on average, are up more than 10% in Europe, 20% from the Middle East, 20% in Latin America and at least 10% in Asia, with overwhelming strength coming from China. What we hear repeatedly on the conference calls is the same message: the strength in International sales is offsetting weakness in the U.S. market. It's truly a bifurcated global economy.
With the bifurcated global economy you spoke about, how does it impact your view of Ingersoll Rand's planned sale of Bobcat?
Well, it makes a lot of sense. Ingersoll Rand (IR) has spent the last couple years transforming itself from a heavy machinery group and into a diversified industrial company. The sale of Bobcat is just another step along the way of realizing that goal. Since announcing the sale, we have become more constructive on the stock.
The biggest positive from the deal is that IR reduces exposure to the U.S residential housing market, which has been a major drag on earnings. We had expected a $4 billion price tag, so we were surprised South Korea's Doosan Infracor paid almost $5 billion, especially at this point in the cycle. When the deal closes, and it should, the company becomes a levered play on the strengthening global economy with the headwind of U.S housing behind it.
Mario Ricchio is a senior analyst covering the machinery industry for Zacks Equity Research
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include TriQuint Semiconductor (TQNT), ASML Holdings (ASML), TRW Automotive (TRW) and American Medical Devices (AMMD). To see their latest posts, click here.
Listen to the audio podcast of the Industry Rank Analysis through Zacks' NEW Audio Feature.
Listen to the audio podcast of the Industry Rank Analysis through Zacks' NEW Audio Feature.
Second-Quarter Earnings Growth Stronger than the First Quarter
4. INVESTMENT IDEAS
The editors at Zacks.com constantly analyze the universe of stocks to find the best investment ideas. Today, learn how you can profit from Warren Buffet's stock investments in combination with the Zacks Rank:
The Standard and Poor's 500 Index, one of the most commonly used benchmarks for the overall U.S. stock market, had an average annual return of 10.4% from 1965 to 2006. The goal of most investors is to "beat the market", meaning they would like for their portfolio to outperform the S&P 500. Needless to say, this would not have been an easy task over the past 42 years. However, one individual not only beat the market over this time period, he absolutely crushed it. Who, you ask? None other than the "Oracle of Omaha", whose company produced a 21.4% annual return.
Warren Buffett is considered by many to be the greatest investor ever. When he took over at Berkshire Hathaway in 1965, its shares sold for $20. They recently traded at a whopping $110,000 per share. What is this Wall Street wizard's recipe for success? Wouldn't we all like to know? We do have some clues, however.
He will only invest in businesses that he fully comprehends. He will analyze a company's return on equity (ROE) and its debt-to-equity ratio. Only quality management teams make the cut and he loves companies with a distinct competitive advantage. Last, and certainly not least, Buffett determines what every value investor attempts to uncover-the company's intrinsic or actual value.
In his company's annual reports, Mr. Buffet includes a table outlining his common stock investments. I went through his 2006 annual report and identified which were currently Zacks #1 Rank (strong buy) or Zacks #2 Rank (buy) stocks or have a Zacks Recommendation of Buy. A common stock investment made by Mr. Buffet, with a favorable Zacks Rank or Recommendation, is probably the best combination since peanut butter and jelly.
The Coca-Cola Company (KO)
The Coca-Cola Company is the largest global producer and marketer of soft drink concentrates and syrups. The company also markets and distributes tea, water and juices. KO markets its nonalcoholic beverages under various brand names, including Coca-Cola, Diet Coke, Fanta, Sprite, Minute Maid and POWERade. The company sells its beverage concentrates and syrups to bottling and canning operators, distributors, fountain wholesalers and fountain retailers. Consumers in nearly 200 countries enjoy Coca-Cola's products each day.
KO has an impeccable track record of exceeding analysts' earnings expectations. The company topped the Street's estimate in 16 consecutive quarters. On Jul 17, KO beat the consensus earnings estimate by three cents when it posted second-quarter profits of 85 cents per share. When compared to the company's prior-year period, earnings were up 14.9%. Revenues rose 19.3% to $7.73 billion from $6.48 billion reported a year earlier. Total unit case volume jumped 6%. Similar to ConocoPhillips, shareholders have enjoyed both dividend payments and share repurchases. Year-to-date, KO bought back $1.0 billion of its stock and plans on repurchasing a total of $1.75 billion to $2.0 billion of its stock for the full year. On Jul 19, the Board of Directors declared a regular quarterly cash dividend of 34 cents per common share. KO has a current dividend yield of 2.6% and a five-year average dividend yield of 2.3%. The company is currently a Zacks #2 Rank stock (buy).
Moody's Corporation (MCO)
Moody's Corporation is among the world's most respected, widely utilized sources for credit ratings, research and risk analysis. In addition to the company's core ratings business, it publishes market-leading credit opinions, deal research and commentary. MCO serves corporate and governmental issuers of securities, as well as institutional investors, depositors, creditors, investment banks, commercial banks and other financial intermediaries.
When it comes to beating the Street's earnings estimate, MCO is one of the best. The company topped the consensus estimate for 16 consecutive quarters. In eight out of the 16 aforementioned quarters, MCO surprised to the upside by a double-digit percentage. On Aug 1, MCO reported second-quarter profits of 76 cents per share. The result amounted to a solid 10.1% positive surprise with analysts expecting 69 cents per share. Compared to earnings of 59 cents per share in the prior-year period, the result marked a 28.8% year-over-year improvement. Revenues rose 26.3% to $646.1 million from $511.4 million for the same quarter of 2006. Analysts were forecasting revenues of $616.1 million. In addition to posting solid quarterly results, the Board of Directors approved a new $2 billion stock buyback program. It also declared a regular dividend of eight cents per share. MCO is currently yielding 0.60%. MCO is currently a Zacks #2 Rank stock.
5. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.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 Ranked (Strong Buys) have produced the following results for investors:
And just as importantly, the Zacks #5 Rank stocks (Strong Sell) List has alerted investors as to which stocks to dump from Their portfolios to avoid unnecessary losses.
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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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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1986 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1986-2011 and were examined and attested by Baker Tilly, an independent accounting firm.
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