Thursday - May 11, 2006
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2337. Manage Profit from the Pros subscription: 1. ZACKS EQUITY RESEARCH Mergers and acquisitions in the medical device consumables space is following a cyclical pattern, according to senior medical device and supply analyst Gregory Aurand, CFA. We spent a few moments with him discussing one such recent merger, and found out what he expects from this group going forward. Are you noticing any new trends within any sectors in your coverage recently? Actually, just earlier this week, Fisher Scientific (FSH) and Thermo Electron (TMO) announced that the two companies will be merging later this year. This is probably a very strong sign of things to come in the device supply consumables space. What we are seeing is a realignment of vendors with suppliers and customers; customers in particular are downsizing the number of vendors they want to use – partly due to reduced funding from the federally funded NIH – in the hospital market as well as the lab space. The announcement was a bit of a surprise, but it’s not really surprising in that it aligns two of the biggest players in this group. It creates a strong behemoth. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - So you expect to see additional mergers of this sort in the near future? Well, two of the main competitors here are Applied Biosystems (ABI) and Waters Corp. (WAT), neither of which are currently in my coverage. I do cover Invitrogen (IVGN), however, which directly competes in the supply space with Fisher, and I am inclined to say that this Fisher/Thermo deal probably puts them under the gun to find another instrument partner to align themselves with. Invitrogen does have somewhat of a collaboration with ABI, the Mass Spec instrument manufacturer, but the prospect of a merger between Invitrogen and ABI wouldn’t get the same cost synergies that the Fisher/Thermo deal produces. As this deal reduces the overall number of vendors used, this likely puts pressure on Invitrogen to align with a partner sooner than they would have wanted. They probably would have looked to make some sort of a deal in three or four years anyway, but I expect this will really start to accelerate the process. What are some of the benefits these companies are looking to gain from this merger? Well, we’ve seen some pretty lackluster results from suppliers recently. Both Fisher and Invitrogen have put up ho-hum results this quarter. But suppliers are not known for their scientific expertise. It’s the Mass Specs and capital equipment companies that are the science behind it and the drivers of this group. They’re the ones developing the next applications to be used as bolt-ons for their clients – labs, in particular. Distributors deal mostly with the higher profile, higher margin products, but they aren’t the scientific force behind their use. Therefore, because growth has been lackluster lately, this deal makes a lot of sense for Fisher to get into bed, so to speak, with an instrument manufacturer – one of the scientific drivers in this space. Also for Fisher, there was not much of a premium paid, based on the terms of this deal. Fisher has tried to develop its expertise on the science side through acquisitions, but this deal really gets them a seat at the table. Do you expect to see a boost to the company’s numbers right away? Well, as I mentioned, the deal isn’t slated to close until later this year – sometime in the fourth quarter. I’d say it will take some time to see the benefits of this. I think it will generate some savings in the near term, but I don’t see it driving product synergies right away. By ’07-‘08, it should drive greater usage. But that’s not to take away the fact that this deal will lower the number of distributors in the marketplace, and creating one of the largest companies within the lab instrument space. So I think this is a very good deal for both companies. It also leaves Invitrogen standing alone as the only single-player remaining in the supply space. As far as immediate boost to the stocks, they basically went up 10% early on the news, but have since come back down. Fisher is trading a little higher than before the announcement, Thermo a little lower. I think everybody realizes it’s going to take some time. There is no magic bullet. To read the complete Analysts Interview, click: http://at.zacks.com/?id=2693. Gregory Aurand, CFA is a senior analyst covering the medical devices and supply industry for Zacks Equity Research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog - NEW! Get real-time market insights from Zacks Equity Research Analysts. See their latest posts, click here. CACI International (CAI) - Gaining New Business. For full Zacks research report, click here. Evergreen Solar (ESLR) - Valuation Not Justifiable. For full Zacks research report, click here. In the Home Stretch Zacks Industry Rank for the Week of May 8
2. Zacks Challenge: Top Player Interview Zacks.com features a free investment simulator where our customers can prove their stock picking skills to the rest of the world. In these articles we will share with you the insights and recommendations from Top Simulator Players. Learn more about the current Zacks Challenge at: http://at.zacks.com/?id=2514. This week Zacks is excited to introduce another top Simulator player, Lamar Keener (aka: momotrader12). Lamar moved into third place in the Second Quarter Zacks Stock Challenge with a 50% gain since Apr 3. Lamar credits taking actions to keep his emotions at bay for his strong performance. Some of the stocks that Lamar has been trading in his Simulator portfolio include Hansen Natural (HANS), Empire Resources Inc. (ERS), Encore Wire Corporation (WIRE), RPC, Inc. (RES) and GOL Intelligent Airlines (GOL). Lamar’s current portfolio can be viewed at: http://at.zacks.com/?id=2515. So what is his secret? Previously, Lamar let emotions interfere with his trading decisions, which hurt his past returns. As a result, this evolving trader is testing out a mechanical strategy, specifically following weekly stock picks from Investor’s Business Daily. He assigns an equal dollar amount to each stock pick and sells the stocks when they no longer appear on the list. Lamar credits this new approach for his recent success and says that if it continues to work, he will apply the strategy to real money trading. Is there research involved? Although Lamar is following a mechanical strategy, he is constantly keeping his eyes open for new opportunities. Among resources that he regularly checks are the Motley Fool, Yahoo Finance, Smart Money, Trading Markets.com, and Briefing.com. Lamar also participates in an online trading group, which is where he heard about the Zacks Challenge. What does he look for in a stock? This trader described his preferred stocks as having: “Strong fundamentals, including consistent growth in revenues and profits, with high relative strength”. More specifically, Lamar summarized, “Momentum growth stocks.” He also pays attention to technicals. Lamar eyes candlestick patterns and moving averages for entry and exit points. Ideally, he looks for stocks that he can hold for several days or weeks. When is it time to sell? Lamar views finding strict rules for determining when to sell as key to generating good returns. This is why he is using Simulator to test a strategy that is new to him. “Honestly, I have been having trouble knowing when to sell. So I am working on developing a mechanical strategy that will take away the emotion,” admitted Lamar. Any favorites? Who is the big winner?This market player is a fan of and has made a lot of money with RPC, Inc. (RES). Hansen Naturals (HANS) has been one of his best performers, however, up by more than 45% since he added the stock at the beginning of the contest. Advice for the newbies? For those who are thinking about making their first few trades in today’s market, Lamar suggests practicing first. He said, “paper trade, paper trade, paper trade. Join simulation contests, several of them, and try different strategies. Then when you begin trading with your money, go slow and take it easy. If you hit a bad streak, take a break. But don't give up. Keep working it. Get a system that works for you.” Sign up now for the new Zacks Stock Challenge. New game starting April 2006. Its free. Its fun. It's the place to show your investing prowess. The best stock pickers will be rewarded with thousands of dollars in prizes. Learn more at: http://at.zacks.com/?id=2671. Trade Options? Then sign up for the Zacks Options Challenge at: http://at.zacks.com/?id=2672. 3. 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: PEG Ratio This strategy uses the PEG Ratio to find attractively priced stocks poised for price appreciation. The PEG Ratio is simply the P/E (Price divided by Earnings) of a stock divided by its 5-year projected growth rate. Too often investors think of value investing being the antithesis of growth investing. The beauty of using PEG is that you can find value stocks even amongst hot growth stocks. Let's take a closer look. A company with a P/E Ratio of 20 and a Growth Rate of 10% will have a PEG Ratio of 2.0 (20 / 10 = 2.0). While a company with a P/E Ratio of 40 and a Growth Rate of 50% will have a PEG Ratio of only 0.8 ( 40 / 50 = 0.8) The stock with the P/E of 40 is actually the better bargain since its PEG Ratio is lower (0.8) implying it's undervalued with more upside potential. In general, a PEG value of less than 1 is considered undervalued while greater than 1 is thought to be fully valued to overvalued. The lower the PEG, the better the value, because the investor would be paying less for each unit of earnings growth. Using this indicator in a stock screening strategy can produce stellar profits, such as a +38.9% return in 2004 and 16.3% in 2005. Here are four stocks that make the grade for the PEG Ratio Profit Track: ChipMOS Technologies, LTD. (IMOS), a Zacks #1 Rank (Strong Buy) stock, recently reported strong first-quarter results. Earnings per share were nearly 25% better than analyst projections (27 cents versus 22 cents per share). Analysts responded by revising their earnings forecasts upward for the full year by seven cents to $1.10 per share. These analysts also appear to like IMOS’ valuation, a P/E of 11.2 and a PEG ratio of 0.28, as is evidenced by the average broker recommendation (ABR) of 1.0. Continue your research on IMOS at: http://at.zacks.com/?id=2354. Eagle Materials, Inc. (EXP), a Zacks #1 Rank (Strong Buy) stock, continues to trade at a discount despite a combination of positive earnings surprises and rising estimates. EXP recently reported fiscal fourth-quarter profits that were 13 cents above expectations. Following the report, analysts raised their projections for fiscal 2007 to profits of $4.40 per share from profits of $4.25 per share. Despite this bullishness, the stock trades at a PEG ratio of just 0.40. Continue your research on EXP at: http://at.zacks.com/?id=2355. More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Grey Wolf, Inc. (GW) is well liked by analysts, as is evidenced by the ABR of 1.87. The stock’s valuation is part of the reason for analysts’ buy recommendations. GW trades at a P/E multiple of 13.6 and PEG ratio of 0.44. But analysts also like the company’s growth prospects, and have raised their full-year earnings projections by six cents to 84 cents per share. Continue your research on GW at: http://at.zacks.com/?id=2356. Helix Energy Solutions, Inc. (HELX) continues to trade at a low valuation despite a strong earnings report and bullish analyst recommendations. The company recently reported first-quarter earnings of 67 cents per share, nearly double the results of a year ago. HELX also raised the lower end of its guidance for full-year earnings and now anticipates between $2.70 and $3.30 this year. Analysts are positive about the Helix’s prospects, having raised estimates and recommending the stock to their clients (ABR of 1.53). Nonetheless, HELX trades with a low PEG ratio of just 0.37. Continue your research on HELX at: http://at.zacks.com/?id=2357. To see the full list of stocks that currently pass this winning screen, go to: http://at.zacks.com/?id=2358. 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” at: http://at.zacks.com/?id=2359. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Three Days Up: Price and Volume Kevin Matras goes over a price and volume screen for finding stocks on the move, NOW!!!: http://at.zacks.com/?id=2360. 4. ZacksAdvisor.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...
Nutrisystem Inc. (NTRI) provides weight management system and fitness products and services in the United States. Its weight management program primarily includes a prepackaged food program and counseling. The company also offers online and telephone counseling and support to customers using its diet counselors. It sells its prepackaged foods to weight loss program participants through the direct channel, QVC, field sales channel, and the case distributor channel. NTRI's first-quarter results were nothing short of spectacular. The company earned $22.3 million, or 60 cents per share, compared with $3.2 million, or 10 cents per share, during the same period a year ago. Analysts were only expecting 40 cents. The most recent quarter's results included stock options expenses of 3 cents per share. Sales surged to $146.8 million from last year's $37.4 million. Management also guided considerably higher for the second quarter and the for the full year. For the second quarter of 2006, the Company estimates that revenues will be between $118 and $122 million, an increase of at least 188% year over year. Diluted earnings per share are expected to be between 44 cents and 46 cents. Analysts had expected 34 cents per share. Naturally, the C.E.O. was quite pleased with the results: "We are off to a great start for 2006," said Michael J. Hagan, Chairman and Chief Executive Officer. "Our operating profit and earnings per diluted share for the first quarter exceeded our full year 2005 results. NutriSystem continues to be in high growth mode and we continue to show improvement against our most important metrics, including customer and revenue growth, free cash flow generation and declining customer acquisition costs." The C.F.O. also chimed in on the company's margins: "In the first quarter we began to see the sustainable earnings power of this business," said James D. Brown, Executive Vice President and Chief Financial Officer. "We increased operating margin by nearly 10 percentage points year over year primarily through our pricing power, buying power and increased marketing efficiency." NTRI has exceeded earnings estimates for five consecutive quarters, with four of those surprises surpassing 10%. Three analysts have raised their numbers for 2006. Over the past 30 days, 2006 estimates have increased 30.9% to $1.82 per share. Also, 2007 estimates have risen 36% over the same time period. Despite an explosive run in the stock, it is still attractively valued at 28x next year's estimates. This is slightly below the company's long-term growth rate of 29%, giving the stock a PEG ratio of 0.97.
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Zacks #1 Stocks on the Move 05/17/2013
| Company Name | Symbol | %Change |
|---|---|---|
| VIASAT INC | VSAT | 19.35% |
| OLD SECOND B | OSBC | 5.76% |
| GAMCO INVEST | GBL | 4.61% |
| CORNING INC | GLW | 4.47% |
| SYNCHRONOSS | SNCR | 4.23% |
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