Thursday - August 9, 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.
Euronet Worldwide, Inc. (EEFT)
Euronet Worldwide, Inc. (EEFT) is a company with explosive growth opportunities. Central Europe and India are large growth markets for the company. Earnings estimates for this year have jumped 24 cents to $1.11 per share over the past month. Similarly, next year's numbers have jumped 22 cents to $1.44 per share. The company has significantly exceeded earnings estimates in two out of the past three quarters. Analysts project long-term earnings growth of 19.67%. Read the full analysis on EEFT now!
Granite Construction Incorporated (GVA), a Zacks #1 Rank stock, exceeded analysts' earnings expectations in six of the past eight quarters by an average margin of 40.6%. Consensus earnings estimates for both this year and next year are up over the past 30 days. Earnings per share are projected to grow 12% over the next 3-5 years. GVA has a current dividend yield of 0.66%. Read the full analysis on GVA now!
Momentum - Triumph Group Inc. (TGI)
Triumph Group Inc. (TGI) has benefited from continued strength in the Aerospace sector. Earnings momentum, increasing estimates for this year and next, and solid growth in order backlog should further the stock's consistent momentum going forward. Read the full analysis on TGI now!
Fresh Del Monte Produce, Inc. (FDP) exceeded analysts' earnings expectations for the past three quarters by an average margin of 98.7%. Consensus earnings estimates for both this year and next have risen over the past week. Earnings per share are projected to grow 10% over the next 3-5 years. This Zacks #1 Rank stock has a price-to-book ratio of 1.4 compared to 4.6 for the market and 2.1 for the industry. Read the full analysis on FDP 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:
Beris (Rank #9 with $169,417)
ONCE WALL STREET DARLING, NOW FORGOTTEN, BASEMENT-BARGAIN
MONOPOLY PLAY: CAN GX DELIVER AGAIN? (GLBC)
AN UNPRECEDENTED ETF TRADE EXPLAINED (PART 1)
Marco M. Racca (aka: TheInstitutional) has been playing the markets for more than 20 years. He has been able to achieve superior returns by practicing patience and investing for the long term. He noted, "The identification of longer term trends have a significant impact on my investments. I focus on global trends because global trends are important drivers of cash flows, and cash flow growth is the key driver of share prices long term. Experience has taught me that investments benefiting from these trends carry a significantly lower risk."
The Zacks $100K Challenge player employs a screening strategy that covers the gamut. Marco explained that he looks for sectors or industries that are or will be stronger than the overall market. Solid fundamentals are important to this market player regardless of whether his picks fall under the value category or the growth category. He also wants to see a pick-up in momentum. "I don't want to buy stocks cheap to just hold them even cheaper. I need winners," proclaimed Marco.
This contestant's Simulator portfolio currently includes Angiotech Pharmaceuticals Inc. (ANPI), Genentech Inc. (DNA), streetTRACKS Gold Shares (GLD), iShares Lehman 20+ Year Treasury Bond (TLT) and UltraShort QQQ ProShares (QID). Take a look at his entire trading history by clicking here.
3. ZACKS EQUITY RESEARCH
Although fear of a collapse in the junk bond market has caused volatility to return to the equity markets, it has yet to cause brokerage analysts to lower their profit projections for S&P 500 earnings. Rather full-year EPS estimates for the S&P 500 have been revised upwards over the past month to $94.06, from $93.06 in early July. The positive revision reflects what has been a good second-quarter earnings season.
Perhaps more notable, brokerage analysts have yet to materially alter their forecasts for the major U.S. investment banks, though there has been some erosion within the last seven days. During the past 30 days, fiscal 2007 estimates are unchanged for Goldman Sachs (GS). The consensus earnings estimate was cut over the past seven days for Bear Stearns (BSC), but this company also had the weakest second-quarter performance of the group, missing expectations by 14 cents - a factor that was weighing on revisions prior to the collapse of the two hedge funds. Two brokerage analysts cut their forecasts on Lehman (LEH) and one cut his forecast on Merrill Lynch (MER) within the past week, though the overwhelming majority of brokerage analysts have left their projections unchanged. The consensus estimate calls for MER to earn $8.81 this year, a penny below last week's forecast. The average projection calls for LEH to earn $7.89 this year, four cents below last week's levels. Estimates have risen for Morgan Stanley (MS) over the past seven days ($8.53 versus $8.50), but are down from 30 days ago ($8.53 versus $8.62).
More. . .
Extending the time frame to 60 days, estimates are higher for all of the firms, except for Bear Stearns. (The current consensus estimate for BSC of $13.79 compares to $14.46 one month ago, $14.89 two months ago and $15.45 three months ago.)
Looking out to fiscal 2008, profit forecasts have been revised upwards for MS over the past 30 days. Projections were just cut for MER, but are remain above the average forecast of 30 days ago. Forecasts are down for BSC and LEH and are unchanged for GS.
There are a few reasons as to why the earnings estimate revisions are not reflecting the credit crunch that has generated so much chatter as of late. One scenario is that the covering brokerage analysts just don't believe the deal volume is going to materially slow. On the flip side, it is possible that brokerage analysts are being too optimistic and/or too slow to change their forecasts. A third reason could be that more than half of the fiscal year is in the bag (less than four months left in the fiscal year for BSC, GS, LEH and MS). The last reason doesn't explain why 2008 forecasts are, on balance, unchanged.
Against this backdrop is the bursting of the liquidity bubble. Access to credit had become too easy, for both consumers and corporations. Similarly the price of debt relative to risk had become too cheap. Like any bubble, conditions were bound to change. What is occurring now is that investors are balking at the terms that risky debt is being offered at; credit is still available, just not a rate that some would be borrowers were hoping to pay. Despite Jim Cramer's rants, the financial markets are not falling apart, rather they are simply moving back closer to a state of normalcy.
BSC, GS, MER and MS are all Zacks #3 Rank ("hold") stocks. LEH is a Zacks #2 Rank ("buy") stock. All five companies are classified in Financial-Investment Brokers.
To read the complete Analyst Interview, 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 Bayer AG (BAY), Tesoro Corp. (TSO), King Pharmaceuticals (KG) and Ctrip.com (CTRP). 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 we highlight...
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.
Dynamic Materials Corp. (BOOM) recently reported second-quarter results and rose to a new 52-week high shortly thereafter. Earnings per share of 46 cents beat the previous year's 41 cents and exceeded the consensus estimate by nearly 10%. Sales increased 24% to $34.5 million on a year-over-year basis. Dynamic Materials offers a PEG ratio of 0.54. Continue your research on BOOM now!
Fortress Investment Group LLC (FIG), a Zacks #1 Rank (Strong Buy) company, satisfies the criteria of this Profit Track with a PEG ratio of 0.26. The company will announce results for the second quarter on August 14, 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. Continue your research on FIG now!
Spirit AeroSystems Holdings, Inc. (SPR) is also a Zacks #1 Rank (Strong Buy) company. SPR recently released second-quarter earnings of 49 cents per share, which matched the consensus estimate. The company noted that solid operating performance across the company while executing key development programs and winning new business demonstrate the value SPR is bringing to its markets, customers, and shareholders. SPR has a PEG ratio of 0.38. Continue your research on SPR now!
Tidewater, Inc. (TDW), another Zacks #1 Rank (Strong Buy) name, posted fiscal first-quarter earnings of $1.61 per share, excluding charges. The result outperformed the year-ago total of $1.23 per share. While earnings per share came in just a penny below Wall Street expectations this quarter, TDW's quarterly earnings per share were ahead of expectations during the preceding four consecutive quarters. Tidewater's PEG ratio stands at 0.17, which translates into a very appealing valuation. 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”.
Listen to the audio podcast for Screen of the Week through Zacks' NEW Audio Feature.
Kevin Matras goes over a Relative Price Strength strategy for finding winning stocks in all markets: 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...
Precision Castparts Corp. (PCP) is a worldwide manufacturer of complex metal components and products. The company is a market leader in manufacturing large, complex structural investment castings and is a leading manufacturer of airfoil castings used in jet aircraft engines. In addition, the company has expanded into the industrial gas turbine, fluid management, industrial metalworking tools and machines and other metal products markets.
The company announced fiscal first-quarter results in late July. Precision Castparts said it generated significant sales and earnings growth, both on a year-over-year and a sequential basis, for the first quarter of fiscal 2008, while aggressively integrating the recently acquired GSC Foundries, Cherry Aerospace, and McWilliams Forge businesses.
Total first-quarter sales of $1,660.1 million increased 49.2% on a year-over-year basis. Quarterly earnings per share $1.61 outperformed the consensus estimate by 12% and topped the year-ago quarter. PCP delivered earnings per share that were above analyst expectations for the past five consecutive quarters.
"We have positioned the company extremely well to take full advantage of the upward trends in our major markets,'' said Mark Donegan, chairman and chief executive officer of Precision Castparts Corp. "We are seeing extremely strong demand in the commercial aerospace market, with sustained growth in IGT and continued upside opportunities in non- aerospace markets served by extruded pipe and Special Metals' nickel-based alloys. Over the past 12 months, we have added the necessary critical capacity to handle higher volumes, and we will be alert to any new market developments that might require further capital investments."
Wall Street is upbeat on PCP. Current second-quarter earnings estimates of $1.65 per share are a penny above last week's projections. One month ago, analyst expectations were $1.47. Wall Street forecasts stand at $6.74 per share for the year ending March 2008, up from last week's estimates of $6.66. Earnings expectations were pegged at $6.08 per share 30 days ago.
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.
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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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