Monday - June 25, 2007
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1. ZACKS RANK BUY STOCKS
Zacks #1 Rank stocks average a 31.9% 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 - Cubic Corporation (CUB)
Cubic Corporation's (CUB) results prove that the defense business is in great shape. The company has a record backlog of $621 million, and has recently inked contracts that ensure this level will be stable or even grow. CUB has exceeded earnings estimates in five out of the past six quarters. Four analysts have raised their estimates for this year. Over the past 60 days, this year's estimates have risen 22 cents to $1.37 per share. Read the full analysis on CUB now!
Growth & Income - Hewlett-Packard Company (HPQ)
Hewlett-Packard Company (HPQ) topped analysts’ earnings expectations in 11 consecutive quarters by an average margin of 11.4%. In addition to posting solid second-quarter results, HPQ raised its full-year earnings per share and revenue guidance. Consensus earnings estimates have risen over the past 60 days. Earnings per share are projected to grow 12% over the next 3-5 years. HPQ has a current dividend yield of 0.71%. Read the full analysis on HPQ now!
Momentum - Morgan Stanley (MS)
Morgan Stanley (MS) reported a record breaking second quarter, blowing away analyst estimates. Losses in the subprime area were overwhelmed by strong performances from most other segments. Look for the company’s strong fundamentals and consistent earnings momentum to fuel further price acceleration in the coming months. Read the full analysis on MS now!
Value - Anixter International, Inc. (AXE)
Anixter International, Inc. (AXE), which was first featured as a Value pick on Nov 21, has returned 30%. The company exceeded analysts’ earnings expectations for the past 10 quarters by an average margin of 13.7%. Earnings per share are projected to grow 14% over the next 3-5 years. This Zacks #1 Rank stock has a price-to-book ratio of 3.2, compared to 4.6 for the market. Read the full analysis on AXE 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: High Rank Value
Two of the most commonly accepted measures of a value stock are a price-to-earnings (P/E) multiple of 15.0 and a price-to- book (P/B) multiple of 3.0. Although many studies have shown performance advantages to investing in value stocks, not all value stocks are actually bargains. A value a stock is only a good buy if earnings are expected to improve in the future.
High Rank Value is a strategy designed to find the true bargains among value stocks. By requiring a Zacks Rank of #1 ("Strong Buy") or #2 ("Buy"), this strategy restricts the pool of value stocks to only those with positive revisions in earnings estimates. In other words, profits are expected to improve in the future at a faster pace than originally anticipated.
Here are four stocks that make the grade for the High Rank Value Profit Track:
Aspen Insurance Holdings Ltd. (AHL) recently established a new 52-week high and currently trades slightly below that level. In early May, the company posted first-quarter earnings of $1.26 per share, soaring past the previous year’s 59 cents and outpacing the consensus estimate by 42%. The company mentioned that all of its product segments performed well, and Aspen Insurance experienced a very strong contribution from investments. Keeping in mind that only value stocks that have a price-to-book (P/B) multiple of less 3 can be a part of this Profit Track screen, AHL offers an extremely attractive P/B of 0.99. Its price-to-earnings (P/E) multiple of 6.45 also translates into a very appealing valuation, considering this screening strategy calls for a P/E of less than 15. Continue your research on AHL now!
Consolidated Edison Inc. (ED) satisfies the criteria for this Profit Track as evidenced by its price-to-earnings (P/E) multiple of 14.18 and a price-to-book (P/B) multiple of 1.44. In early May, ED announced first-quarter results. Earnings per share topped the consensus estimate by 30% and increased on a year-over-year basis. The company noted that its quarterly performance represents a solid start for the year and is consistent with ED’s expectations, adding that it continues to make significant investments throughout its system to meet the needs of its customers. Continue your research on ED now!
Team Financial Inc. (TFIN) released first-quarter earnings of 32 cents per share in early May. The result topped the consensus estimate by 7% and surpassed the year-ago total. Loans receivable increased approximately 3.6% from the previous quarter, primarily as a result of an increase in construction and land development loans. With a price-to-earnings (P/E) multiple of 13.63 and a price-to-book (P/B) multiple that stands at 1.10, TFIN can be considered a bargain. Continue your research on TFIN now!
Zenith National Insurance Corp. (ZNT) recently hit a new 52-week high and is trading near that range. The company recently declared a quarterly dividend of 42 cents per share. The dividend is payable August 14, 2007 to stockholders of record at the close of business on July 31, 2007. In late April, ZNT reported first-quarter earnings that were ahead of analysts’ expectations by approximately 21%. The result also outperformed the year-prior earnings per share. Zenith National Insurance has a price-to-earnings (P/E) multiple of 7.11 and a price-to-book (P/B) multiple of 1.82. Continue your research on ZNT 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 why you want to own stocks with new analyst coverage. Read more...
3. ZACKS EQUITY RESEARCH
Listen to the audio podcast of the Earnings Preview through Zacks' NEW Audio Feature:
The Federal Reserve Open Market Committee ("the Fed") will hold a two-day meeting on Wednesday and Thursday. The Committee's statement is expected to be released at about 2:15 p.m. (plus or minus five minutes) on Wednesday. The target for the federal funds rate should be left unchanged at 5.25%.
What could change is the language used in the statement. Core inflation is moving down towards the upper end of the Fed's perceived comfort range, though food and energy prices remain high. Resource utilization is basically unchanged from the last meeting. The adjustment in the housing sector is still ongoing. The economy appears to have picked up steam in the second quarter based on the ISM and Philadelphia Fed surveys. At the same time, a correction in the bond market has occurred, sending yields considerably higher. It seems likely that these two last factors will weigh on the committee's discussions and could cause a change in the statement's language. Obviously, any change in wording will be scrutinized by the financial markets.
More. . .
The Fed's June meeting is not the only event on the economic calendar. May home sales data kicks off this week with existing home numbers due out on Monday and new home numbers due out on Tuesday. The Conference Board will publish its June consumer confidence survey on Tuesday. Wednesday features May durable goods orders. The final revision to first-quarter GDP data will be published on Thursday. Friday is packed with May personal spending and income, May construction spending, June Chicago PMI and the final June University of Michigan consumer confidence survey.
The emphasis on interest rate moves will remain amplified because of a relative lack of catalysts from the equity markets. The end of the fourth quarter could bring some window dressing from portfolio managers, but this should not have a significant impact on the overall weekly returns. The number of estimate revisions has been falling and while some companies could provide updated guidance, nothing more than a nominal increase in the overall number of estimate revisions is expected, at best.
The earnings calendar won't help much either. Only 45 companies are scheduled to report quarterly results (16 are S&P 500 members). Micron Technology (MU) and Oracle (ORCL) could have some influence on tech stocks, though the current trend in estimate revisions does not suggest either company is going to revise guidance upwards. The housing sector will also get additional focus with KB Home (KBH) and Lennar (LEN) reporting.
Companies That Could Issue Positive Earnings Surprises during the Week of June 25 - June 29
Monsanto (MON) recently raised its full-year earnings guidance to between $1.75 and $1.80 per share, an increase of 15 cents per share. As part of this new guidance, the company expects fiscal third-quarter profits to be about $1.00 per share. All of the covering brokerage analysts promptly adjusted their forecasts, resulting in full-year and third-quarter consensus estimates of $1.81 and $1.00 per share, respectively. So, where is the room for the upside? MON has topped expectations during the past two quarters by an average of five cents per share, leading to the possibility that the company was a bit conservative with its guidance. Monsanto is scheduled to report on Thursday, June 28, before the start 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 PepsiCo (PEP), Barrier Therapeutics (BTRX), Autoliv, Inc. (ALV) and Lloyds TSB Group, Plc (LYG). To see their latest posts, click here.
Listen to the audio podcast of Earnings Trends through Zacks' NEW Audio Feature.
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:
Nabor's Industries' (NBR) Average Broker Recommendation is up to 1.73. Long-term growth is generally consistent with the long-term prospects of the oil and gas industry, according to Zacks Research Digest. With commodity prices sustaining a high level, the oil industry is spending more on capital projects. In the current environment, pricing is on the rise and the near-term growth outlook is positive. The long-term growth rates provided by brokerage firms range between 5% and 61.5% for NBR. Read the Research Digest report on NBR
National Semiconductor's, (NSM) Average Broker Recommendation has risen to 2.15. According to analysts polled by Research Digest, NSM is now focused on pursuing opportunities in high-performance analog. In wireless handsets, the Company has a roster of top-shelf customers, including Nokia, Motorola, and Samsung, as well as emerging Asian ODMs/OEMs. Management is also seen as taking strides in putting more of its components into 2.5G and 3G handsets. In flat panel displays, NSM has targeted the high-end display market where it sells power management chips, interface chips, and column drivers. Analysts believe NSM is enjoying the cumulative benefit of the strategy. Read the Research Digest report on NSM
Tiffany & Company (TIF): The stock’s ABR is up to 1.70. Analysts are positive on the stock due to new products, marketing and customer service initiatives, and new sales assortments supported by a strong ad campaign. Also, continuing share repurchases should be accretive to earnings in the upcoming quarters. Tiffany’s brand strength remains the key to its long-term growth, according to most of the analysts. In addition to TIF's continuing strength in the international market, the company continues to add variety to product offerings at all price points. Read the Research Digest report on TIF
Anadarko Petroleum's (APC) Average Broker Recommendation is up to 2.33. Analysts polled by Zacks Research Digest believe APC’s global portfolio of assets holds significant unrecognized value, and the company’s asset base is expected to help generate a more sustainable growth profile. The company is showing particularly favorable trends in the deep Gulf of Mexico K2 complex, and is expected to begin production of natural gas through the Independence Hub in the Eastern GOM during 3Q07. Read the Research Digest report on APC
5. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.
Global Balancing Act
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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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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