Monday - April 30, 2007
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1. ZACKS RANK BUY STOCKS
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 - Intuitive Surgical, Inc. (ISRG)
Intuitive Surgical, Inc. (ISRG) is a company on the cutting edge with very little competition. The company has comfortably exceeded earnings forecasts in 12 straight quarters. Yearly growth has been in the triple digits for several of these quarters. Seven analysts have raised their numbers for this year. Over the past week, this year's estimates have jumped 19 cents to $2.77 per share. Read the full analysis on ISRG now!
Growth & Income - Johnson Controls, Inc. (JCI)
Johnson Controls, Inc. (JCI), which was first featured as a Growth and Income stock on Jun 23, 2006, has returned over 27%. JCI exceeded analysts’ earnings expectations in six out of the past seven quarters. After posting solid second-quarter fiscal 2007 results, the company raised its full-year profit and revenue guidance. Consensus estimates are on the rise for this Zacks #1 Rank stock. JCI has a current dividend yield of 1.3% and a five-year average dividend yield of 1.6%. Read the full analysis on JCI now!
Momentum - Valero Energy Corporation (VLO)
Valero Energy Corporation (VLO) posted record quarterly earnings that surpassed analysts’ expectations by 10 cents. The stock is currently trading at record highs on stronger-than-average volume. Look for continued price acceleration in the direction of the underlying trend. Read the full analysis on VLO now!
Value - SeaBright Insurance Holdings, Inc. (SEAB)
SeaBright Insurance Holdings, Inc. (SEAB) , which was first presented as a Value pick on Jan 5, is still a Zacks #1 Rank stock (strong buy). The company continues to exceed the Street’s earnings expectations and consensus estimates are still trending higher. Earnings per share are expected to grow 15% over the next 3-5 years. SEAB has a price-to-book ratio of 1.5, compared to 4.5 for the market. Read the full analysis on SEAB 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 stock.
Here are four stocks that make the grade for the Earnings and Margins Profit Track:
Covansys Corp. (CVNS) will release financial results for the first quarter on May 2, 2007. The company posted fourth-quarter earnings of 67 cents per share in early February. The result surpassed analysts' expectations by 14% and soared past the previous year's total. Revenues climbed to $925.3 million from last year's $617.5 million. BGC has a ROE of 34.75 and a price to sales ratio is 0.80. Continue your research on CVNS now!
GigaMedia Ltd. (GIGM) boasts earnings per share growth of 292% for the most recently completed year, versus the year-prior. Its net margin stands at 0.33. GIGM announced fourth-quarter earnings of 17 cents per share in mid-march, exceeding the consensus estimate by 41.67%. The company stated that record revenues in its poker software business combined with growing contributions from its Asian online games business and consequent expansion in its consolidated operating margin drove the best-ever annual and quarterly financial performance. Continue your research on GIGM now!
Logility, Inc. (LGTY) released financial results for its fiscal third quarter in early March. GAAP earnings per share totaled 15 cents, which matched the previous year's result. Logility said it was pleased with the quarterly performance, pointing out that it added 23 new customers and delivered all-time record revenues and operating earnings. LGTY, a profitable company with a net margin of 0.21, currently boasts the highest year-over-year earnings per share growth of 980% for the fiscal full year when compared to all the other companies listed under this Profit Track. Continue your research on LGTY now!
Matrix Service Co. (MTRX) meets the criteria of this Profit Track as evidenced by its year-over-year earnings growth of 614% for the fiscal= year. The company recently posted fiscal third-quarter earnings of 24 cents per share, beating the consensus estimate by 33% and improving on the year-prior result. Matrix Service commented that its quarterly performance significantly exceeded its expectations as the company was able to add to its strong talent pools in the construction services groups allowing it to capture and execute more projects, particularly in the Downstream Petroleum Industry. Continue your research on MTRX 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 explains how to find winning stocks in the winningest sectors. Read more...
3. ZACKS EQUITY RESEARCH
May starts with another big week for earnings. Approximately 800 companies are on deck, 93 of which are in the S&P 500. Dow components General Motors (GM), Proctor & Gamble (PG) and Verizon (VZ) will be among those releasing their quarterly results.
Although the number of earnings reports is high, profit news should not be as influential in determining market direction. The reason is that many of the mega-cap companies have already reported – as of Thursday evening, almost 300 companies within the S&P 500 had reported. This isn’t to say that profit reports won’t continue to grab the headlines, but rather to say that the impact could be more industry specific. Nonetheless, the markets will notice any change in the overall trend.
The good news is that the trend is bullish. Among companies within the S&P 500, approximately four companies are exceeding expectations for every one that is missing. Extending the range to the S&P 1500 (S&P 500, S&P Midcap 400 and S&P Smallcap 600), the ratio of positive to negative surprises is 2.3:1. Median growth rates are 10.5% for the S&P 500 and 8.8% for the S&P 1500.
More. . .
Economic news might impact investor sentiment. The week starts out with March personal income and personal spending data. Soon after, the April Chicago PMI and March construction spending figures will be released – a lot of data for a Monday morning. Wednesday brings March factory orders. Preliminary Q1 productivity numbers will be issued on Thursday along with the April ISM services index. Friday will be highlighted by the April employment numbers. Pay attention to the productivity and employment reports, because the Fed’s next meeting is on May 9. (No change in rates is likely to occur, but the statement will be closely analyzed for a hint of what the Fed plans to do in the future.)
Companies That Could Issue Positive Earnings Surprises During the Week of Apr 30 – May 4
More driver and iron sales led Callaway Golf (ELY) to preannounce first-quarter profits of between 46 to 48 cents per share. The company is seeing early strong demand for higher margin products such as the FT-i and the FT-5 fusion technology products. Three of the four covering brokerage analysts have raised their forecasts in response, pushing the consensus estimate up seven cents to 45 cents per share. The Most Recent Consensus is more bullish at 47 cents per share. ELY had missed four consecutive times before matching estimates last quarter, so suggesting that the company will beat expectations is a gutsy call. Callaway Golf will report on Thursday, May 3, after the close of trading.
Cephalon (CEPH) told investors on Wednesday that it expects first-quarter adjusted income to be in a range of $1.40 to $1.45 per share. The revision equates to an approximate 50% increase in the company’s guidance. CEPH said lower expenses and improved sales of its pain medications are behind the upward revision. The consensus earnings estimate was promptly raised in response to the new guidance from 87 cents per share to $1.43 per share. CEPH has surprised to the upside during each of the past four quarters. Cephalon is scheduled to report on Tuesday, May 1, after the close of trading.
Novatel Wireless (NVTL) recently raised its first-quarter guidance. The company is experiencing strong demand from for its wireless products and accelerated some orders slated for the second quarter into the first quarter. Three of the 11 covering brokerage analysts revised their forecasts following the new guidance, pushing the consensus earnings estimate up six cents to 27 cents per share. The Most Recent Consensus is more bullish at 29 cents per share. It should be noted that two months ago, the first-quarter consensus estimate called profits of just four cents per share. NVTL has exceeded expectations during three out of the past four quarters, though third-quarter profits were two cents below expectations. Novatel Wireless is scheduled to report on Tuesday, May 1, after the close of trading.
Approximately half of the covering brokerage analysts have raised their first-quarter profit forecasts on Sunoco (SUN) within the past 30 days. These revisions have resulted in the consensus estimate rising eight cents to $1.33 per share. The Most Recent Consensus is more bullish at $1.41 per share. SUN has topped expectations during each of the past three quarters. Sunoco is scheduled to report on Wednesday, May 2, after the close of trading.
Charles Rotblut, CFA, is the senior market analyst for Zacks.com. He can be reached at firstname.lastname@example.org
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Ericsson (ERIC), Wilmington Trust Corporation (WL) and Texas Instruments (TXN). To see their latest posts, click here.
4. RESEARCH DIGEST
What is Wall Street saying about your stocks? You'll find the answer in our exclusive Research Digest reports. Here is a synopsis of stocks with recent broker upgrades:
Clear Channel Communications (CCU) has watched its Average Broker Recommendation rise to 2.50. Analysts polled by Zacks Research Digest believe that Clear Channel is well-positioned in the growth business of out-of-home advertising. Firms are also optimistic about CCU’s “Less is More” (LIM) program and believe it will have a positive impact in the long term. Analysts are also encouraged by Clear Channel’s diversified business model, its increased financial flexibility thanks to solid cash flow and its active share buyback. Read the Research Digest report on CCU
Caterpillar Inc.’s (CAT) Average Broker Recommendation has risen to 2.29 of late. According to Zacks Research Digest, analysts appreciate Caterpillar’s competitive advantages, which include its brand recognition, strong product lines and unparalleled global dealer network. Furthermore, the company caters to key sectors and is also an undisputed leader in terms of revenue in industries such as construction. Finally, price realizations, free cash flow and its balance sheet are also considered by analysts to be positives for Caterpillar. Read the Research Digest report on CAT
The Goldman Sachs Group, Inc. (GS) is best-positioned, versus its peers, for long-term earnings growth due to its superior business mix and culture, according to analysts polled at Zacks Research Digest. It has top-tier franchises in equity underwriting, equity and fixed income trading, and financial advisory. GS’ prime brokerage business provides attractive growth opportunities and high margins. Analysts also believe GS' institutional business, including trading, prime brokerage and clearing businesses, combined with minimal exposure to retail, position the company well within the industry. Read the Research Digest report on GS
Lehman Brothers’ (LEH) Average Broker Recommendation is up to 1.73. Organic growth has been the key to LEH’s success, according to Zacks Research Digest. Growing its core competencies, LEH has created a significant and growing global presence in fixed income, equity issuance, trading, and merger and acquisition advisory. The company’s diversified revenue base means it can participate with a vast range of products across wide regions. Non-US businesses are expected to be at the heart of LEH’s long-term growth strategy. Read the Research Digest report on LEH
5. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.
Roundup of New Direct-Purchase Plans
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.
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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Charles Rotblut, CFA
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