Thursday - May 25, 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 Unsure how looming threats about a weakening dollar and high energy costs may affect the U.S. restaurant industry, we thought we would ask senior restaurant analyst Mason Leith. In turn, he told us what to look for (and what to avoid) regarding restaurant stocks. What's new in the restaurant industry over the past 2-3 months? A positive trend for the restaurant industry has been the commodity price declines for meat and dairy from the high levels of the fourth quarter of 2005. The increased expenses had cut into profit margins for many restaurant companies. Recent increases in energy prices may become an issue for the restaurant industry if it puts pressure on consumer discretionary spending. There is evidence to indicate that increased energy prices may be enervating consumer spending. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - How did Q1 earnings turn out? McDonald’s (MCD) reported strong first quarter results. Same-store sales were up 5.2% in the first quarter of 2006. New product launches and extended operating hours have been strong drivers for the company. Yum! Brands (YUM) also reported better-than-expected first quarter results. First quarter total revenue was $2.09 billion, up from $2.05 billion recorded in the same quarter last year, while net income was $0.59 per share, compared to $0.50 in the first quarter of 2005. Yum! Brands’ international expansion remains one of its key growth drivers, with particularly strong growth for its KFC operations in China. Are restaurants similar to retail, in that lower customer spending is a real concern in the short-to-medium term? The higher cost casual-dining restaurants are likely to be more susceptible to consumer spending trends than quick-service restaurants. Quick-service restaurants are not as severely affected by the decline in consumer spending since their food service has a lower cost, and their service is more likely seen as a necessary convenience than a casual-dining restaurant. Quick-service restaurants are not as likely to be seen as a profligate expenditure by expense-conscious consumers. What are restaurants doing to keep their numbers up? Are there lots of spin-offs going on? A bright spot for the industry has been the attractiveness of new issues. McDonald’s recent spin-off of its Chipotle restaurant chain, and Wendy’s (WEN) spin-off of its Tim Horton chain were both tremendously successful. What are your top Buy and Sell recommendations right now, and why? We have a Buy rating on McDonald’s Corporation (MCD). A well-structured revitalization plan and innovative marketing campaigns have been successful for McDonald’s. After reporting lower same-store sales for five consecutive quarters, McDonald’s achieved a turnaround in 2003 and has recorded consistent gains since then. We currently have a Sell rating on Landry’s Restaurants (LNY). The acquisition of the Golden Nugget casino adds the complication of operating in a new field for the company. The food service and hospitality portions of the casino’s operations are similar to Landry’s existing operations, however the gaming aspect is new to the company. Increasing seafood expenses, especially for shrimp also makes us less optimistic on Landry’s shares. Mason Leith is a Zacks senior analyst covering the restaurant and media industries. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog - NEW! Get real-time market insights from Zacks Equity Research Analysts. See their latest posts, click here. Sunoco, Inc. (SUN) - Benefiting from Supply Pressures. For full Zacks research report, click here. Neurocrine Biosciences (NBIX) - No Visibility with Indiplon. For full Zacks research report, click here. Outlook for 2006 Remains Bullish Zacks Industry Rank for the Week of May 22
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. Zacks recently caught up with Joe Bartovak (aka: shoelessjoe), who is currently in second place in the Second Quarter Zacks Stock Challenge. Joe’s overall return is more than 100% since Apr 3. This player has just one position in his Simulator portfolio right now, which is O2Diesel (OTD). Some of the stocks he has traded in the past include Miramar Mining (MNG), InterNAP Network Services Corp. (IIP), Northgate (NXG) and Circle Group Holdings (CXN). Click here to check out this competitor’s entire portfolio: http://at.zacks.com/?id=2515. What’s his style? Momentum and timing is a good way to describe this savvy investor’s style. “I have a group of about 60 stocks from all sectors that I watch daily,” he explains. “I try to whittle this group down to around 20 by the time the market opens. Then, if I am on my game, I can find three to five stocks that I can play over and over during the day. I don’t try to hit a homerun each time, lots of singles and doubles works for me. I try to be in tune with the stocks’ movements and I don’t have to buy something every day. Last week I took almost two whole days off because I did not have a good feel for the way the markets were acting.” When Zacks followed up by asking who or what influenced his style of investing, Joe quipped, “I don’t like to lose.” What kind of research does this Zacks Challenge contest conduct? Like most investors, Joe refers to certain websites and magazines to help him navigate through the market. However, this stock picker’s main focus is charts. “I like to catch them as they turn. I try to determine direction first and use the 10-day, five-minute charts,” said Joe. Where does this market enthusiast go when he is on Zacks.com? Joe mostly studies charts, reads news and checks out the latest Zacks rankings. He is also a fan of Zacks’ Profit from the Pros newsletter. “Great reading for beginner or pro,” commented Joe. What does he look for in a stock and how does he know when to sell? When this momentum trader is studying charts and considering stocks, he is on the look out for predictable volatility. Slowing momentum will trigger a sell order for this market watcher. Any favorites? Joe doesn’t have a specific favorite name or names. He likes stocks that are trading in the $1.00 - $3.00 range. “They seem to fit my style,” he added. Was there a big winner? The big winner so far has been O2Diesel (OTD). Joe hardly did any research on this one. He just watched the tape, saw lots of action as well as price appreciation and put in a buy. How about a market outlook and any advice for beginners? Joe does not keep a crystal ball on his desk and is not one to make predictions on which direction the market may go next. But this market player does point out that one can always find a winner in any market. Joe’s advice echoes what many other Simulator leaders have imparted. “Read everything you can from a variety of sources and don't be influenced by any one style of investing; develop your own, one which you are comfortable with,” he said. It’s 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 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 stock. Earnings are the single most important metric for a company. Combine that with a healthy Net Profit Margin and you find a screen that has generated a cumulative return of +425% since January 2001. During 2005, this screen continued its winning ways with a +22.3% return. Here are four stocks that make the grade for the Earnings and Margins Profit Track: American Reprographics Company (ARP) recently announced first-quarter earnings of 32 cents per share, outpacing the consensus estimate by about 10% and surpassing the year-ago total. The company mentioned that it believes that its performance in the first quarter reflects its focus on top line growth and the overall strength of its operations. ARP generated earnings growth of 69% last year over the previous year. The company is profitable as evidenced by its net margin of 0.12. Continue your research on ARP at: http://at.zacks.com/?id=2354. Champion Enterprises, Inc. (CHB), a leader in factory-built construction, grew 164% last year compared to the year-prior. In mid-April, the company posted first-quarter earnings of 18 cents per share, which was above last year’s level. Revenues increased 42% to $346.5 million from the previous year’s $244.3 million. CHB stated that it will continue to pursue strategic acquisitions while at the same time working to improve manufacturing efficiencies in support of its goal to deliver record manufacturing margins and superior shareholder returns. Continue your research on CHB at: http://at.zacks.com/?id=2355. More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Compass Minerals International, Inc. (CMP), a leading producer and marketer of salt and specialty potash, meets the requirements for this Profit Track with annual earnings that were up 3% year-over-year. CMP recently reported first-quarter earnings of 88 cents per share, exceeding analysts’ expectations by nearly 16% and outperforming the previous year’s total. The company noted that this quarter demonstrated the strength of its mild-winter-weather management strategies as well as its ongoing effort to create value for its shareholders. Continue your research on CMP at: http://at.zacks.com/?id=2356. EZCORP, Inc. (EZPW), a Zacks #1 Rank (Strong Buy) company, has seen growth of 61% year-over-year. In late April, the company released fiscal second-quarter earnings of 56 cents per share, beating last year’s 29 and eclipsing the consensus estimate of 54 cents. The company commented that its quarterly results were driven by continued strong growth in its payday loan and credit service business and double digit growth in its pawn business. Continue your research on EZPW 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. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - A Relative Price Strength Screen Kevin Matras goes over a Relative Price Strength strategy for finding winning stocks in both up markets and down: 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...
Archer-Daniels-Midland Company engages in the procurement, transportation, storing, processing, and merchandising of agricultural commodities and products. The company operates in three segments: Oilseeds Processing, Corn Processing, and Agricultural Services. In addition, the company engages in milling wheat, corn, and milo into flour, which are sold to commercial bakeries, food companies, food service companies, and retailers. It produces bakery products and mixes for the baking industry. The company also produces milo to produce industrial flour used in the manufacturing of wallboard. The company is in the sweet spot of the government mandated move to ethanol. As a result, ADM registered a 29 percent increase in third-quarter earnings, driven by an increase in demand for processed oilseeds and corn byproducts such as ethanol. Net income rose to $347.8 million, or 53 cents a share, for the three months ended March 31, or eight cents more than the 46 cents per share expected by analysts. "ADM is on track again for another terrific year," said Patricia Woertz, who took over Monday as the company's president and chief executive officer. "I think all of our core businesses are performing well." ADM's operating profit jumped 46 percent to $549 million during the quarter. Profit from oilseeds -- which include soybean processing and processing of seeds such as rapeseed and cottonseed into vegetable oil -- increased $116 million to $177 million, thanks to improved market conditions across the globe, the company said. Earnings momentum is starting to materialize as evidenced by the last two quarters, in which the company has exceeded estimates by an average of about 18%. This is in stark contrast to the previous three quarters, in which ADM missed estimates in two of them. 2006 estimates have increased 13.8% to $1.89 per share over the past 90 days. The stock is trading at 17x next year's estimates.
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Zacks #1 Stocks on the Move 05/21/2013
| Company Name | Symbol | %Change |
|---|---|---|
| SCIENTIFIC L | SCIL | 8.00% |
| NATUS MEDICA | BABY | 6.11% |
| SUMMER INFAN | SUMR | 6.02% |
| RADIANT LOGI | RLGT | 5.32% |
| NEW ORIENTAL | EDU | 4.51% |
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