Friday - February 2, 2007

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Zacks #1 Rank 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 – Immucor, Inc. (BLUD)

Immucor, Inc. (BLUD) has met or exceeded earnings estimates in each of the past three quarters, with the last two surprises averaging 11%. Year-over-year growth has exceeded 50% in six out of the past seven quarters. Three analysts have raised their numbers for 2006, while two have done so for 2007. Over the past month, this year’s estimates have increased almost 5% to 77 cents per share. Read the full analysis on BLUD now!

 
Growth & Income – T. Rowe Price Group, Inc. (TROW)

T. Rowe Price Group, Inc. (TROW) beat the Street’s earnings estimate in six out of the past seven quarters. The company increased revenues and grew profits for the past four years. Assets under management finished the year at a record $334.7 billion. TROW recently boosted its quarterly dividend by 21.4% to 17 cents per share, leading to a current dividend yield of 1.4%. Read the full analysis on TROW now!

 
Momentum – AK Steel Holding Corporation (AKS)

On Jan 23, AK Steel Holding Corporation (AKS) reported fourth-quarter 2006 earnings per share of 20 cents, missing analysts’ expectations by a penny. Sales grew to $1.58 billion from $1.38 billion. Read the full analysis on AKS now!

 
Value - American Home Mortgage Investment Corp. (AHM)

American Home Mortgage Investment Corp. (AHM), a Zacks #1 Rank stock, exceeded analysts’ earnings expectations for 12 straight quarters. Consensus earnings estimates have shot upward since AHM released its fourth-quarter and full-year results. On Nov 20, the Board of Directors declared a quarterly cash dividend of $1.06 per share. The company has a price-to-book ratio of only 1.6, compared to 4.8 for the market. Read the full analysis on AHM now!

 
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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.

 
Here are four stocks that make the grade for the Earnings and Margins Profit Track:

BluePhoenix Solutions Ltd. (BPHX) experienced earnings per share growth of 90% on a year-over-year basis. BPHX posted third-quarter earnings of nine cents per share in early November. The result topped the consensus estimate by 12.5%. The company noted that its steady increase in revenues is mainly attributed to the broadening awareness and acceptance of the inevitability of IT system modernization. Continue your research on BPHX now!

Mitcham Industries, Inc. (MIND) boasts year-over-year earnings growth of 248%. MIND has a net margin of 0.31. The company released third-quarter earnings of 38 cents per share in early December. The result matched Wall Street estimates and surpassed last year's third-quarter total of 29 cents. Mitcham Industries noted that it continues to experience high demand for its equipment, driven by the strong worldwide market for seismic services. Continue your research on MIND now!

Team Inc. (TISI) is a Zacks #1 Rank (Strong Buy) company. In early January, the company announced fiscal second-quarter earnings of 58 cents per share, surpassing the year-prior total of 41 cents and eclipsing the consensus estimate by 23%. TISI cited continued broad based organic growth across nearly all its geographic regions and noted that its outlook for the rest of the year remains strong. Team Inc. delivered year-over-year earnings growth of 119%. Continue your research on TISI now!

Universal Stainless & Alloy Products, Inc. (USAP), another Zacks #1 Rank (Strong Buy) company, offers earnings growth of 50% year-over-year. The company recently reported fourth-quarter earnings per share that surpassed the consensus estimate by 21% and outperformed the year-ago total. USAP said it achieved record results in the fourth quarter as it has each quarter this year due to the strength of its niche markets coupled with its targeted investments in capital equipment and personnel. Continue your research on USAP 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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SCREEN OF THE WEEK

New Analyst Coverage

Kevin Matras explains why investors should seek out stocks with new analyst coverage. More...
 

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Though no one was very surprised to see the Fed keep interest rates at 5 ¼%, the language within the report sent the stock market on a rally Wednesday afternoon and into Thursday. For how we should perceive these developments, we turn now to Charles Rotblut, CFA, senior market analyst for Zacks Investment Research.

What about the Fed’s statement yesterday gave investors such a positive signal?

They changed two paragraphs full of wording, and the changes were significant enough to suggest the Fed is on hold [with raising interest rates] for awhile. There are a lot of ways to interpret this statement. Certainly with Richmond Fed president Jeffrey Lacker no longer being a voting member, we didn’t see anyone dissenting from the vote, which decided to keep rates unchanged. But we also saw a statement which really gave the Fed leeway to do what it wants.

More. . .

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Zacks Equity Research continued...

To date, predictions about a rate cut have been premature. This new statement does give the Fed the ability to cut rates, though I don’t see this happening in the first quarter or even first half of the year, but certainly the market took this as a change in tone, as well as a possibility that the Fed could cut rates in the future.

Can you foresee something in the near future where there might be a need to cut rates?

It just depends on economic data. If we continue to see the economy slow, and slow at a faster pace than people expect, then the Fed could cut rates. But we did have a good fourth quarter GDP number – 3.4% – so it’s kind of hard to argue for a cut right now. Of course, economic developments could happen that would change the outlook, especially if growth is not just below trend but far below trend. We’re not expecting this to happen, but there’s always a possibility.

From the Fed meeting, the news also seemed to help Treasury bonds. Do you see this as somewhat of an anomaly?

I don’t think so. Some people are taking the Fed statement as if the economy is actually doing better than people thought, and that maybe the Fed is still hawkish on rates, so I think the bond traders took the news more as an uncertainty taken away. The general consensus is that the Fed is definitely on hold, and that helped Treasury bonds – as opposed to fears that the Fed might over-tighten, which is something that could cause problems with the economy.

Do you foresee the market continuing its current upswing, or are you looking for a correction soon?

I could see stocks pulling back after earnings season. We have had some good numbers coming out – Boeing (NYSE: BA) yesterday helped the Dow, last night we saw good numbers from Google (Nasdaq: GOOG). Overall, the ratio of positive surprises to negative surprises is still running below what we’ve seen in past quarters.

For the Zacks Rank universe as a whole, we’ve had about a quarter of those companies report, and the ratio of positive to negative surprises is right now at about 1.7 to 1. For the S&P 500, it’s running a little bit higher. Growth is coming in pretty decently, especially for the S&P 500; on average, we’re looking at about 14% growth.

Read the complete ANALYST INTERVIEW article now.

Charles Rotblut, CFA is the senior market analyst for Zacks Investment Research.

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MORE FROM ZACKS EQUITY RESEARCH...
 

Analyst Blog

Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Parker Hannifin (PH), Abbott Labs (ABT), Motorola (MOT) and eBay (EBAY). To see their latest posts, click here.

 
BULL OF THE DAY

Northrop Grumman (NOC) - Healthy Growth. For full Zacks research report, click here.

 
BEAR OF THE DAY

CONMED Corp. (CNMD) - Myriad Pressures. For full Zacks research report, click here.

 
ZACKS INDUSTRY RANK

Aerospace Earnings Rise

Boeing’s report highlighted the positive business momentum in the Aerospace sector. More...

 
EARNINGS TRENDS

Seems Like Groundhog Day

The fourth-quarter earnings season is shaping up as a repeat of the previous three. More...

 
Rating Upgrades

Find out which stocks have been recently upgraded by Zacks Equity Research: click here.

 
Zacks Equity Research Buys

Read the reports on all of the stocks on the Zacks Equity Research Buy List: click here.

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Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.

 
Having Its Moments

Nadine Wong profiles a biotech that is poised for a rebound. Check out her price target for the stock. More...

 
Still Undervalued

Donald Rowe sees depressed stock prices, but mentions that some companies could rally. More...

 
Which Way for the Market?

Jack Adamo ponders a few different market scenarios. Discover the possibilities and check out a few stock updates. More...

OTHER TOOLS FROM ZACKS

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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:

• +31.8% average annual return since 1988 versus +11.8% for S&P 500
• Outperformed S&P 500 in 17 of the last 18 years
• +43.8% total return from 2000 to 2002 - the worst bear market in over 60 years.
• +18% in 2005

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.

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.

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• Broker Recommendation changes
• Earning Estimate revisions
• Earnings Announcements
• Zacks Rank changes

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We hope you enjoyed this issue of "Profit from the Pros", And we look forward to visiting with you again next week.

REFER-A-FRIEND

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Regards and Happy Investing,

Charles Rotblut, CFA

Senior Market Analyst
Zacks.com

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.

The Zacks Performance Rank performance is the total return of equal weighted simulated portfolios consisting of those stocks with the indicated Zacks Rank net of fees. Results reflect the reinvestment of dividends and other earnings. Simulated results do not represent actual trading and may not reflect the impact that economic and market factors might have had on decision-making if an adviser were actually managing a client's money.

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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