Monday - July 23, 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 - Lindsay Corporation (LNN)
Lindsay Corporation (LNN) is riding the wave of the
agricultural boom to greater profits. Farm equipment spending
is healthy and getting better, which should help Lindsay's
pricing. Over the past month, this year's earnings estimates
have jumped 27 cents to $1.35 per share. There is only one
analyst covering the stock, so the "neglected firm" effect
could work in the company's favor. The analyst projects 15%
long-term earnings growth for the company. Read the full analysis on LNN now!
Growth & Income - National Instruments Corporation (NATI)
National Instruments Corporation (NATI) topped the Street's
earnings estimate in 10 out of the past 11 quarters by an
average margin of 12.0%. Consensus earnings estimates for both
this year and next have been on the rise for this Zacks #1
Rank stock. Steadily increasing free cash flows over the past
few years helped the company increase shareholder value
through dividend payments and share buybacks. NATI is
currently yielding 0.81%. Read the full analysis on NATI now!
Momentum - AmBev (ABV)
Companhia de Bebidas das Americas (ABV), or AmBev, has soared
over 52% year to date, reflecting positive earnings estimate
revisions for both 2007 and 2008. Look for the positive
momentum to continue, with a breakout from near-term
resistance being a particularly bullish technical development. Read the full analysis on ABV now!
Value - Terra Industries, Inc. (TRA)
Value - Eaton Corporation (ETN) exceeded analysts' earnings
expectations in 14 out of the past 16 quarters. The company
recently boosted its full-year outlook by 30 cents for both
its net income per share and operating earnings per share.
Consensus estimates have risen over the past seven days.
Earnings per share are projected to grow 10% over the next 3-5
years. ETN has a price-to-book ratio of 3.4, compared to 4.8
for the market. Read the full analysis on ETN 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:
Complete Production Services, Inc. (CPX) will release second-quarter results on July 24, 2007 and will hold a conference call on the 25th. CPX offers a PEG ratio of 0.44. In late April, the company reported first-quarter earnings of 65 cents per share, topping the consensus estimate by nearly 7% and beating the previous year's result. Continue your research on CPX now!
Freeport-McMoRan Copper & Gold, Inc. (FCX) recently established a new 52-week high. The company will release financial results for the second quarter on July 25, 2007. Freeport-McMoRan Copper & Gold announced first-quarter results in late April, which included an earnings per share increase from the year-prior result. FCX satisfies the criteria of this Profit Track with a PEG ratio of 0.36. Continue your research on FCX now!
Reliance Steel & Aluminum Co. (RS) recently posted second-quarter earnings of $1.59 per share, exceeding the consensus estimate by 2%. The company stated that customer demand and pricing for its products remain at relatively healthy levels in the markets where it operates although demand is down a bit from last year's levels for some of its products. RS sports a PEG ratio of 0.51. Continue your research on RS now!
Sunoco Inc. (SUN) will release results for the second quarter on August 1, 2007. The company declared a dividend for the third quarter of 27.5 cents per share payable September 7, 2007 to shareholders of record at the close of business on August 8, 2007. The company reported first-quarter results in early May. Earnings per share of 70 cents, excluding special items, surpassed the year-ago total of 59 cents. SUN's PEG ratio stands at 0.46. Continue your research on SUN 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
The economic calendar will have its first report of note on Wednesday with June existing home sales data. Thursday features June new home sales and June durable goods orders. The week ends with the final University of Michigan consumer confidence index and the advance estimate of second-quarter GDP.
Second-quarter earnings will be front and center. We have confirmed scheduled reports for 847 companies, 175 of which are in the S&P 500. Dow components 3M (MMM), American Express (AXP), AT&T (T), Boeing (BA), Du Pont (DD), ExxonMobil (XOM) and Merck (MRK) will report. Given the possibility of positive surprises (second-quarter estimates for MMM, BA and XOM have been revised higher within the past 30 days), a further ascent by the Dow into record territory seems likely.
More. . .
Speaking of surprises, results for the second-quarter are looking alright so far. Not great, but certainly nothing to complain about either. Approximately one-fourth of S&P 500 companies have reported and positive surprises are outnumbering negative surprises by a margin of 2.8:1. Median company growth is running at 9.4%. For the broader S&P 1500 (S&P 500, S&P MidCap 400 and S&P SmallCap 600), growth is a little slower at 8.6%. Positive surprises are outnumbering negative surprises by a 2.6:1 ratio. Relative to the same point during first-quarter earnings, median company growth is better this earnings season, but the proportion of negative surprises is also higher. Nonetheless, it is still relatively early, so we caution about reading too much into these numbers.
Companies That Could Issue Positive Earnings Surprises during the Week of July 23 - 27
One of the things I focused on in last Wednesday's Industry Rank Analysis was an improvement in earnings projections for multiple oil-related companies. Higher oil prices are causing brokerage analysts to change their earnings assumptions. As a result, both ConocoPhillips (COP) and ExxonMobil (XOM) could both top expectations when they report second-quarter results.
COP said in early July that "worldwide refining margins for the second quarter are expected to be significantly higher than the first quarter". Offsetting this may be a decline in production levels because of maintenance, the company's exit from Dubai and a few other factors. Nonetheless, brokerage analysts believe profits will be above first-quarter and year ago levels. The company is projected to report profits of $2.59 per share, 21 cents more than the consensus estimate of a month ago. The Most Recent Consensus is even more bullish at $2.65 per share. COP's first-quarter results were below expectations, but the company did top estimates during the previous three quarters. ConocoPhillips is scheduled to report on Wednesday, Jul 25, before the start of trading.
XOM's market cap was $521 billion on Friday morning, a sign that investors are reacting positively to raised earnings expectations. (To put this number in perspective, ExxonMobil is currently worth nearly 25% more than General Electric (GE). More than half of the covering brokerage analysts have raised their second-quarter forecasts on the oil conglomerate during the past 30 days, sending the consensus estimate 17 cents higher to $1.92 per share. The Most Recent Consensus Estimate is more bullish at $1.95 per share. XOM has exceeded expectations during the each of the past four quarters by an average margin of 15 cents per share. ExxonMobil is scheduled to report on Thursday, Jul 26, before the start of trading.
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 Logitech (LOGI), China Life Insurance (LFC), SurModics (SRDX) and CEMEX (CX). To see their latest posts, click here.
4. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.
Time to Go Big?
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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