Monday - July 9, 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 - RBC Bearings Inc. (ROLL)
RBC Bearings Inc. (ROLL) once again reported solid earnings momentum and as a result, estimates for this fiscal year and next continue to rise. With expected earnings growth above the industry average and a year-to-date return of over 40%, ROLL is clearly demonstrating aggressive growth characteristics. Read the full analysis on ROLL now!
Growth & Income - Pall Corporation (PLL)
Pall Corporation (PLL), a Zacks #1 Rank stock, reported solid third-quarter fiscal 2007 results in late May. Consensus earnings estimates for both this year and next year are up over the past month. PLL has a current dividend yield of 1.03% and a five-year average dividend yield of 1.67%. Its return on equity easily tops that of the industry average-17% compared to 11%. Read the full analysis on PLL now!
Precision Castparts Corp. (PCP)
Precision Castparts Corp. (PCP) continues to reach new highs due to continued strength in the commercial aerospace market and a successful acquisition strategy. With increasing earnings estimates for this year and next, look for the company's impressive momentum to continue. Read the full analysis on PCP now!
Value - Bristow Group, Inc. (BRS)
Bristow Group, Inc. (BRS) recently reported record revenues, operating income, net income and earnings per share for fiscal 2007. Consensus earnings estimates for both this year and next have risen over the past 30 days. BRS has a price-to-book ratio of 1.9, compared to 4.5 for the market and 2.2 for the industry. Its return on equity of 13% tops the industry average of 8%. Read the full analysis on BRS 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: PEG Ratio
This strategy uses the PEG Ratio to find attractively priced stocks poised for price appreciation. The PEG Ratio is simply the P/E (Price divided by Earnings) of a stock divided by its 5-year projected growth rate. Too often investors think of value investing being the antithesis of growth investing. The beauty of using PEG is that you can find value stocks even amongst hot growth stocks. Let's take a closer look.
A company with a P/E Ratio of 20 and a Growth Rate of 10% will have a PEG Ratio of 2.0 (20 / 10 = 2.0).
While a company with a P/E Ratio of 40 and a Growth Rate of 50% will have a PEG Ratio of only 0.8 ( 40 / 50 = 0.8)
The stock with the P/E of 40 is actually the better bargain since its PEG Ratio is lower (0.8) implying it's undervalued with more upside potential. In general, a PEG value of less than 1 is considered undervalued while greater than 1 is thought to be fully valued to overvalued. The lower the PEG, the better the value, because the investor would be paying less for each unit of earnings growth.
Here are four stocks that make the grade for the PEG Ratio Profit Track:
Eldorado Gold Corp. (EGO) sports a PEG ratio of 0.30. The company closed on Friday at a 52-week high. In early May, EGO released financial result for the first quarter. Earnings per share totaled four cents, surpassing the consensus estimate by nearly 33% and reversing the year-ago loss of two cents per share. The company called it a very successful quarter, stating that it produced over 88,000 ounces of gold at an average cash operating cost of $220 per ounce, and EGO fully expects to meet its forecasted 2007 production of 310,000 - 330,000 ounces of gold at an approximate cash operating cost of $225 per ounce. Continue your research on EGO now!
Fortress Investment Group LLC (FIG), a Zacks #1 Rank (Strong Buy) company, recently declared a second-quarter dividend of $0.225 per share, representing a 5.9% increase from the previous quarter's dividend and a 32.4% increase since its IPO in February of 2007. In mid-May, FIG posted first-quarter results, noting that its strong results reflect its ability to raise new capital and generate top tier investment returns in its managed funds. The company offers a PEG ratio of 0.35. Continue your research on FIG now!
Superior Energy Services, Inc. (SPN) satisfies the criteria of this Profit Track with a PEG ratio of 0.29. The company announced first-quarter earnings 78 cents per share, eclipsing the previous year's 40 cents and topping the consensus estimate by 3%. SPN commented that its growth strategy played out nicely during the period as some of its businesses accelerated while others remained seasonally slow before improving late in the quarter. Continue your research on SPN now!
Tidewater, Inc. (TDW) closed at a new 52-week high on Friday. The company continues to have an appealing valuation as evidenced by its PEG ratio of 0.20. Tidewater is scheduled to reports fiscal first-quarter results on July 26, 2007. In late May, the company declared a quarterly dividend of 15 cents per share. TDW announced fiscal fourth-quarter earnings per share of $1.56, improving on last year's $1.11 and outpacing the consensus estimate by 6%. Continue your research on TDW 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 looks at how to use Price and Volume for locking in profits, cutting losses and spotting potential trend changes. Read more...
3. ZACKS EQUITY RESEARCH
Second-quarter earnings season officially starts on Monday afternoon with Alcoa's (AA) second-quarter report. The aluminum maker is projected to have earned 86 cents per share. Four brokerage analysts cut their forecasts during the past seven days, resulting in a one-cent drop in the consensus forecast, but, expectations are essentially unchanged from 60 days ago. Investors should note that despite its status as being the company to "officially" kick-off earnings season, AA does not provide a good proxy of how corporate earnings will actually perform.
Preseason performance is also not representative, because of the limited number of companies. Just 54 S&P 1500 (S&P 500, S&P MidCap 400 and S&P SmallCap 600) companies reported second- quarter profits during June. Positive surprises are leading negative surprises by a ratio of 4:1. Median company growth has run at 12.5%.
More. . .
Consensus estimates are calling for the median company in the S&P 1500 to have generated second-quarter growth of 6.3%. Growth among large-caps should be better with the median S&P 500 company expected to report growth of 8.4%. On an index- weighted basis, forecasts call for S&P 500 growth of 6.7%. I expect the actual numbers to be better given the propensity of companies to surprise to the upside, a proportionate lack of earnings estimate cuts over the past several weeks and what appears to be an acceleration in economic growth during June. (Employment growth was decent and both ISM surveys signaled positive.)
The first official week of earnings season tends to the calm before the storm and the week of July 9 will be no different. Just 30 companies are expected to report, with Alcoa, Marriot (MAR) and Yum Brands (YUM) representing the S&P 500.
The economic calendar will not provide much excitement either. May consumer credit will be released on Monday afternoon. Tuesday features May wholesale trade data. May trade deficit figures will be published on Thursday. The week ends with June import and retail sales numbers, the University of Michigan's initial July consumer confidence index and May business inventories.
Volume could pick up a bit as traders and institutional investors come back from vacation. The favorable economic backdrop should provide a tailwind for stocks, though with the bulk of earnings reports yet to come, it is questionable whether there will be enough momentum to keep the Dow at new highs, assuming a breakout occurs early in the week. Plus, the weather is likely to generate some chatter on trading floors with a heat wave expected to hit the East Coast.
Charles Rotblut, CFA, is the senior market analyst for Zacks.com. He can be reached at email@example.com.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Hilton Hotels (HLT), Rio Tinto (RTP), Horizon Offshore (HOFF) and SAP AG (SAP). 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:
Edison International (EIX) is an electric power generator and distributor. It is also one of the largest players in the renewable energy field, which analysts appreciate because it gives the company a competitive advantage over its peers. Analysts polled by Zacks Research Digest also like the company’s strong balance sheet and cash position, as well as its strong cash flow generated from international sales. Edison International’s Average Broker Recommendation has risen to 1.75. Read the Research Digest report on EIX
National Semiconductor Corporation (NSM) which creates high-value analog devices and subsystems, has watched its Average Broker Recommendation advance to 1.85. The company restructured its business with asset sales and plant closures, which analysts at Zacks Research Digest believe is one of its key positive arguments. Better mix, cost reductions and a sharper focus on higher-end analog business contributed to a record fiscal year 2007 gross margin and profitability. This, in turn, caused growth expectations to increase. Other favorable aspects that analysts appreciate include its commitment to product line, operating leverage and lean customer inventory levels. Read the Research Digest report on NSM
Coca-Cola Enterprises (CCE) enjoyed a recent brokerage upgrade that helped its Average Broker Recommendation rise to 2.33. Over the past three months, earnings estimates for this Zacks #2 Rank company are up approximately 2.5%. Analysts polled by Zacks Research Digest like CCE’s strong pipeline of products, which should boost topline growth. Furthermore, strong spending by Coca-Cola will support key products. Analysts also appreciate that the company maintains disciplined cost control. In fact, lower interest expense has offset recent operation cost increases. Read the Research Digest report on CCE
Applied Biosystems Group (ABI), an Applera Corporation business, is a Zacks #2 Rank company with an Average Broker Recommendation that has recently advanced to 1.90. The group serves the life science industry and research community by developing and marketing instrument-based systems, consumables, software and services. Analysts polled by Zacks Research Digest appreciate the company’s leadership position in its field, as it maintains the top spot in DNA sequencers, DNA synthesis and PCR. Looking forward, analysts believe the company will continue benefiting from R&D spending by pharmaceutical and biotechnology companies, as well as academia. 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.
Markets in Uptrend
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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Regards and Happy Investing,
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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