Monday - August 6, 2007
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1. ZACKS RANK BUY STOCKS
Zacks #1 Rank stocks average a 32.2% 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 - Plexus Corporation (PLXS)
Plexus Corporation (PLXS) has now delivered two outstanding quarters in a row. It has exceeded analyst views by an average of 23% over those two periods. Over the past 90 days, this year's estimates have risen a dime to $1.35 per share. Next year's numbers have jumped 12 cents to $1.57 per share.
Analysts are projecting earnings growth of 17.58% over the long-term. Read the full analysis on PLXS now!
Growth & Income - Watson Wyatt Worldwide, Inc. (WW)
Watson Wyatt Worldwide, Inc. (WW) topped the Street's estimate in 14 out of the past 15 quarters. The company raised both its revenue and profit guidance for the full year back in early May. Consensus earnings estimates for both this year and next year are up over the past week. On May 14, the Board of Directors declared a quarterly cash dividend of 7.5 cents per share of common stock. Read the full analysis on WW now!
Momentum - DreamWorks Animation SKG Inc. (DWA)
DreamWorks Animation SKG Inc. (DWA) has soared over 11% year to date, reflecting the success of "Shrek the Third,"
increasing estimates, and a strong track record of earnings surprises. Read the full analysis on ISRG now!
Value - Steel Dynamics, Inc. (STLD)
Steel Dynamics, Inc. (STLD), a Zacks #1 Rank stock, exceeded analysts' earnings expectations in five out of the past seven quarters by an average margin of 11.2%. The company has returned value to its shareholders through both share buybacks and dividend payments. Consensus earnings estimates for both this year and next year are up over the past 30 days. STLD's return on equity tops that of the industry average-35% compared to 22%. Read the full analysis on STLD 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: Return on Equity
One of the quickest ways to gauge whether a company is creating assets or gobbling up investor's cash is to look at their Return On Equity (ROE). The fast moving ROE Profit Track screening strategy from Zacks.com has generated an impressive return of +21.4% in 2005. In 2006, it continued to outperform the S&P 500, returning +27.0% versus the S&P 500 rise of +16.7%.
Here are four stocks that make the grade for the Return on Equity Profit Track:
Anixter International, Inc. (AXE) recently posted second-quarter earnings $1.53 per share, outpacing last year's $1.15 and surpassing the consensus estimate by 18%. Sales increased 22% on a year-over-year basis. Anixter International satisfies the criteria of this Profit Track as evidenced by its ROE of 23.78 and price to sales ratio of 0.51. Continue your research on AXE now!
Express Scripts, Inc. (ESRX) recently posted second-quarter earnings of 57 cents per share, eclipsing last year's 38 cents and surpassing the consensus by nearly 6%. The company increased its full-year 2007 guidance from a range of $2.15 to $2.21 to a range of $2.23 to $2.29. Analysts are in agreement as evidenced by current 2007 estimates of $2.28 per share, up from last month's $2.22. ESRX offers a ROE of 54.03 and a price to sales ratio of 0.76. Continue your research on ESRX now!
Matrix Service Co. (MTRX) issued a fiscal year 2008 revenue guidance of $700 million to $750 million in mid-June. MTRX has a ROE of 22.34 and a price to sales ratio of 0.95. In early April, the company reported fiscal third-quarter earnings of 24 cents per share, beating the consensus estimate by 33%. MTRX exceeded analysts' expectations each time over the past five consecutive quarters. Continue your research on MTRX now!
AMERCO (UHAL) sports a ROE of 12.42 and its price to sales ratio is 0.60. The company will release fiscal first-quarter results on August 8, 2007. In early June, the company announced a fiscal fourth-quarter loss of 89 cents, which was better than the consensus estimate by 2%. Continue your research on UHAL 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 goes over a Relative Price Strength strategy for finding winning stocks in all markets. Read more...
3. ZACKS EQUITY RESEARCH
A one-day Fed meeting will be held on Tuesday, Aug 7. The Federal Open Market Committee is not expected to change interest rates. It is unclear what, if anything, the Fed will change in its statement about housing or the economy. In its June statement, the Fed noted that the economy is expected to expand at "a moderate pace" and that there was an "ongoing adjustment in the housing sector". Both of these observations continue to hold true, while the pace of inflation probably has not slowed enough to convince the Fed that rising prices are no longer a threat.
The Fed's August meeting will be held during a week when the amount of economic data will be comparatively scarce and the pace of earnings news is slowing down. The first set of economic data will be published on Tuesday with preliminary second-quarter productivity data being released in the morning and June consumer credit being released in the afternoon. Wednesday features June wholesale trade numbers. July import price data will be released on Friday.
We have confirmed reports from 677 companies for the week of Aug 6-10. More importantly, the average size of the company reporting will be considerably smaller ($2.9 billion versus $6.1 billion for the week of Jul 30 - Aug 3), meaning that the reports will have less of an impact on market direction. Dow component American International Group (AIG) will report on Wednesday, Aug 8, after the close of trading.
More. . .
The markets, unfortunately, have not reacted to what is a good second-quarter earnings season. The reason is concern about problems within the credit markets, fueled by the ongoing implosion in subprime and Alt-A mortgage loans. The return of volatility could create buying opportunities, particularly when one considers that the median company in the S&P 500 has reported 12.9% EPS growth and the median company within the S&P 600 (S&P 500, S&P MidCap 400 and S&P SmallCap 600) has generated 9.4% growth. In addition, earnings estimates, on average, have been revised upwards. Profits for the S&P 500 are currently forecast to reach $94.06 this year, which is 1.1% better than what brokerage analysts were projecting a month ago.
From a trading standpoint, it is important to realize that August can be a volatile month. The number of earnings reports will decline throughout the month, many Americans will be out on summer vacations and hurricane season tends to start reaching its peak near the end of the month. Given the focus on the credit markets, it is likely that the equity markets will continue to experience choppy waters over the next several weeks.
Companies That Could Issue Positive Earnings Surprises during the Week of Aug 6 - 10.
Foster Wheeler (FWLT) has topped expectations by an average margin of 45 cents per share over the past four quarters. During the past month, one of the five covering brokerage analysts raised his forecast for second-quarter earnings, pushing the consensus estimate up by three cents to $1.33 per share. Foster Wheeler is scheduled to report on Wednesday, Aug 8, before the start of trading.
JA Solar Holdings (JASO) completed its IPO last February and then proceeded to top expectations for its first reported quarter as a publicly-traded company. Ahead of the Chinese solar cell manufacturer's second-quarter report, brokerage analysts have been revising their projections upward. The consensus estimate calls for profits of 20 cents per share, two cents above the average projection of a month ago. JA Solar is scheduled to report on Wednesday, Aug 8, before the start of trading.
A strong summer season for the travel industry has led one brokerage analyst to raise his second-quarter forecast on Priceline.com (PCLN). The revision caused the consensus estimate to rise by two cents to 80 cents per share. The Most Recent Consensus is more bullish at 90 cents per share. PCLN has topped expectations during each of the past four quarters by an average margin of 14 cents per share. Priceline.com is scheduled to report on Tuesday, Aug 7, after the close of trading.
A recent upward revision to TBS International's (TBSI) second- quarter consensus estimate suggests optimism about the shipping rates that the company was able to charge. During the past 30 days, one of the two covering brokerage analysts raised his forecast, sending the consensus estimate three cents higher to 55 cents per share. TBSI has topped expectations for three consecutive quarters by an average margin of 13.7 cents per share. TBS International is scheduled to report on Wednesday, Aug 8, 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 United Natural Foods (UNFI), Brasil Telecom (BRP), Sohu.com (SOHU) and Sierra Wireless (SWIR). To see their latest posts, click here.
Second-Quarter Growth Stronger Than the First Quarter
4. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.
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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