Thursday - June 28, 2007
Want to view the archive of past issues? Click here.
Manage Profit from the Pros subscription:
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 – Monsanto Company (MON)
Listen to the audio podcast on MON through Zacks' NEW Audio Feature
Monsanto Company (MON) is a company in the right spot at the right time. Surging corn prices have allowed it to beat earnings estimates in seven out of the past eight quarters. Five analysts have raised their estimates for this year. This year's estimates have jumped 21 cents to $1.81 per share over the past 90 days. The stock has an ROE of 12%, above the industry average of 7%. Read the full analysis on MON now!
Airgas, Inc. (ARG), which was last presented as a Growth & Income pick on Dec 1, exceeded analysts’ earnings expectations for eight consecutive quarters. The company recently raised its first-quarter profit guidance to between 61 cents and 63 cents per share. As a result of ARG’s bullish guidance, analysts have been upping their earnings estimates. On May 8, the Board of Directors increased the company’s quarterly cash dividend to nine cents per share from seven cents. Read the full analysis on ARG now!
Momentum – The GEO Group Inc. (GEO)
The GEO Group Inc. (GEO) has soared over 56% year-to-date, reflecting consistent earnings momentum, increasing profit estimates and a strong underlying trend. On May 1, the Zacks #1 Rank stock reported first-quarter earnings of 22 cents per share, up from 16 cents last year and two cents above expectations. Driving the earnings growth, revenues rose by 28% to $237 million. The following business segments reported double-digit increases in revenue: US Corrections, up 11.9% to $164.3 million; International Services, up 24.7% to $28.8 million; and GEO Care, up 48.3% to $22.1 million. Read the full analysis on GEO now!
Oil States International, Inc. (OIS), a Zacks #1 Rank stock, topped the Street’s earnings estimate for nine straight quarters by an average margin of 15.3%. Consensus earnings estimates for both this year and next are up over the past week. OIS has a price-to-book ratio of 2.3, compared to 4.5 for the market and 4.1 for the industry. Its return on equity surpasses that of the industry average—24% compared to 22%. Read the full analysis on OIS now!
2. Best of the Zacks $100,000 Challenge
Zacks is conducting a nationwide talent search to find the very best stock pickers. The winner gets a $100,000 dream job with Zacks! . Sign up for free to join the competition, or just read what stocks the leading players are trading on the Zacks Challenge Player Blogs.
Here's what the leading players are saying lately:
TUBR TUBEAROO INC IS GETTING UP (TUBR)
Beris (Rank #18 with $150,914)
NEW TO TECHNICAL TRADING? ALL YOU NEED TO KNOW TO START: CHART BASICS
Daniel Kepke (aka: Danny1992) is a chartist who tries to buy stocks that are experiencing an up trend and preferably from a 52-week low level. He commented, “I read charts, and I see how well the stock performed in the past. I also buy stocks that hit their 52-week low, and I see if the stock is coming back.”
The Zacks $100K Challenge contender also screens for solid dividends and price-to-earnings (P/E) multiples of 20 or higher. “I look for many things, like I see if the stock has a good dividend and if it has a P/E of 20 or higher because I believe those stocks move the most. They are the most speculative,” noted Daniel.
This player’s strategy seems to be working as evidenced by his Simulator portfolio that currently boasts an overall return of 38.19% since the start of the year. Daniel’s holdings include Top Tankers Inc. (TOPT), Micron Technology Inc. (MU), VeriChip Corporation (CHIP), True Religion Apparel Inc. (TRLG) and Force Protection Inc. (FRPT). Take a look at his entire trading history by clicking here.
3. ZACKS EQUITY RESEARCH
Listen to the audio podcast of the Industry Rank Analysis through Zacks' NEW Audio Feature.
Corporate profits for the second quarter look to be the slowest in quite some time. Earnings for the S&P 500 are expected to rise just 6.2%. On a company specific basis, the numbers look somewhat better with the median company expected to achieve 8.4% growth. Obviously, not every member of the S&P 500 has the same weighting in the index, hence the difference in growth rates.
Continuing a trend that occurred in the first quarter, growth is projected to be stronger among large-cap companies than among mid- and small-cap companies. The median company in the S&P 1500 (which is comprised of the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600) will be 6.3%. The disparity may be partially explained by greater proportion of large-cap companies that have foreign exposure and have active share repurchase programs. Bigger companies also tend to be more diversified.
There have been second-quarter reports from 30 companies in the S&P 1500 so far. The numbers are running above expectations, with 17 positive surprises and five negative surprises (the remainder have matched expectations). Median growth is at 12.7%, but I would caution against reading anything into this. The sample used for these numbers is far too small to draw any trends from. Nonetheless, it does represent a positive preseason.
More. . .
Second-quarter earnings season will "officially" start on July 9 with Alcoa's (AA) report. The aluminum company is expected to have earned 87 cents per share, a penny higher than what it earned a year prior. The lackluster earnings forecast is fairly typical of what is likely to be reported by many metals companies. Brokerage analysts expect the median metals company to have generated 5.2% growth in the second-quarter. A rally in prices last year is setting up tough comps.
However, earnings will vary by company, however, For example, Comercial Metals (CMC) gave a bullish report last week. The company earned 82 cents per share during its fiscal third-quarter, 32% above year prior profits. Sales rose 15% to $2.3 billion. Higher volumes of scrap processed and favorable conditions in Europe helped to counterbalance the effect of volatile steel prices.
Investors who are looking for growth may want to focus on aerospace, container, medical and oil machinery and services companies.
Aerospace enjoyed strong growth in the first quarter and momentum appears to have carried over to the second-quarter. Defense spending by the U.S. government certainly helps, but the commercial side is the primary driver, a reflection of the ongoing worldwide economic expansion. Boeing (BA) in particular is expected to show strong growth with profits of $1.14 per share following a year prior loss of 21 cents per share. The Dow component is also about to premiere its first new jetliner in 13 years, the 787 Dreamliner. Aerospace component companies Goodrich (GR) and Precision Castparts (PCP) are also expected to report strong growth.
To read the complete Industry Rank Analysis, click here.
Charles Rotblut, CFA is the senior market analyst for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Kroger Company (KR), Pride International (PDE), ABM Industries (ABM) and Merck & Co. (MRK). To see their latest posts, click here.
Listen to the audio podcast of Earnings Trends through Zacks' NEW Audio Feature.
4. 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.
American Oriental Bioengineering Inc. (AOB) sports earnings per share growth of 48% for the most recently completed year, versus the year-prior. The company offers a net margin of 0.27. AOB recently announced the signing of a letter of intent to acquire Changchun Xinan Pharmaceutical Group Company Limited (CCXA), a privately owned plant based pharmaceutical company. In early May, the company posted first-quarter earnings of 10 cents per share, beating last year's eight cents and matching the consensus estimate. Continue your research on AOB now!
Dynamex Inc. (DDMX) reported fiscal third-quarter earnings of 32 cents per share in early June. The result matched the consensus estimate and outperformed the year-ago total. Sales increased 19.1% from the prior year quarter. DDMX meets the criteria of this Profit Track as evidenced by its net margin of 0.04 and year-over-year earnings growth of 17%. Continue your research on DDMX now!
PMA Capital Corp. (PMACA) released first-quarter earnings of 10 cents per share in early May. The results topped the consensus estimate by 43% and surpassed the previous year's total. Direct premiums written for the first quarter of 2007 were up by 26%, compared to last year's first quarter. PMACA experienced annual earnings per share growth of 120% from the year-prior. Continue your research on PMACA now!
Universal Stainless & Alloy Products, Inc. (USAP) saw annual earnings per share growth of 50% for the most recent full year, versus the year-prior. The company's net margin stands at 0.10. In late April, Universal Stainless & Alloy Products announced a record $1.00 per share for first-quarter earnings. The result beat the consensus estimate by 18% and was ahead of last year's first-quarter performance. USAP stated that its record first quarter shows the ongoing benefit of the company's investments in equipment and personnel over the past two years, which have enabled USAP to respond to strong end markets and continue its shift to higher value-added products while also improving its on-time delivery performance. 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”.
Kevin Matras explains why you want to own stocks with new analyst coverage: Click here.
5. ZacksElite.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...
Chicago-based Jones Lang LaSalle, Incorporated (JLL) is a leading full-service real estate firm that provides corporate, financial, and investment management services. The company caters to corporations and other real estate owners, users, and investors worldwide. A broad real estate product and service range, and extensive knowledge of domestic and international real estate markets, enable Jones to operate as a single-source provider of real estate solutions.
The company divides its business into two primary segments: Investor and Occupier Services (IOS), and Investment Management (IM). The IOS segment is sub-divided into three geographic regions, the Americas (36% of IOS revenue), EMEA (Europe, Middle East, Africa), (43%) and Asia Pacific (21%). The IOS division contributed approximately 84% of total revenue in the 1st quarter of 2007. These units collectively manage owned or leased real estate in international locations, represent tenants for the acquisition and disposition of properties, provide leasing to agencies, service corporate properties, manage property, and provide valuation services.
The Investment Management division, with more than $44 billion under management as of March 31st, provides real estate investment-management services, mainly to institutions, corporations, and affluent individuals. Its prominent customers include the New York City Metropolitan Transportation Authority, Microsoft, and Procter & Gamble. The company runs its global investment management business under the LaSalle Investment Management brand. Jones Lang LaSalle usually invests its clients funds in publicly traded securities of real estate investment trusts (REITs), and via acquisition and development joint venture structures. JLL recently purchased Centerpoint Properties Trust in a joint venture with Calpers. LaSalle Investment Management will own a minority interest in the $3.4 billion deal and realize an acquisition fee as well as ongoing advisory fees.
Worldwide, real estate fundamentals are improving across most property types. JLL, with its extensive reach is uniquely positioned to capture the upside of high transaction activity in global real estate markets.
JLL had recently increased its semi-annual dividend by 40% to 35 cents per share.
Jones Lang is uniquely positioned to capture incremental returns in China and India, where increasing levels of off-shoring by U.S.-based companies is driving strong demand for real estate services in these countries. Zacks senior REITS analyst Greg Sukenik also likes the prospects for the Chinese economy and real estate markets as valuations and deal flow will continue to create opportunities for JLL.
The company released its results for the first quarter in early May, referring to it as a strong quarter. Earnings per share of 81 cents soared past last year’s 10 cents and surpassed the consensus estimate by an impressive 523%. Jones Lang LaSalle exceeded analysts’ expectations four times out of the past five consecutive quarters.
As one of its highlights for the quarter, the company noted that on a year-over-year basis revenue increased 45% to $490 million with growth in all business segments.
"The strength of our first-quarter performance is a clear sign that we are sustaining the momentum that drove us successfully through last year," said Colin Dyer, Chief Executive Officer of Jones Lang LaSalle. "Our results reflect the investments we have made over the past two years; healthy conditions in the world's major economies, global real estate and capital markets; and the commitment of our people to superior client service. This strong start positions us well for the rest of 2007," Dyer added.
Wall Street remains bullish full-year 2007 earnings expectations. Current year 2007 estimates of $5.60 per share moved up from last month’s forecasts of $5.35. Two months ago, earnings estimates stood at $4.93 per share.
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 Rank (Strong Buy) List has produced the following results for investors:
And just as importantly, our #5 Ranked stocks (Strong Sells) have alerted investors as to which stocks to dump from their portfolios to avoid unnecessary losses.
FREE PORTFOLIO TRACKER
Do you believe that these events affect stock prices?
If you answered yes, then how are you staying on top of these changes for your stocks? If you are one of the 55,000 investors who wake up every morning to the Daily Portfolio Updates emails from Zacks.com, then you are all set. If not, then sign up now to get this vital information sent to you daily to help take definitive action to improve your portfolio's performance. Did we mention it's free? Get started now!
We hope you enjoyed this issue of "Profit from the Pros", And we look forward to visiting with you again next week.
If you enjoy this e-mail newsletter, then please pass it along to a friend. Simply forward them the link below to sign up for their own free subscription. If you're reading a forwarded copy, sign up for your own, so you get this wealth of information every week. Just click here. THANKS!
Regards and Happy Investing,
Charles Rotblut, CFA
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.
*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.
To contact us by mail:
Zacks Investment Research
To unsubscribe from receiving "Profit from the Pros" e-mail newsletter, click here.