Friday - September 7, 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 - Capella Education Company (CPLA)
Capella Education Company (CPLA) is teaching investors how to make money. Over the past 60 days, this year's earnings estimates have risen seven cents to $1.19 per share. Next year's numbers have jumped a dime to $1.53 per share. Analysts are projecting 28.2% earnings growth next year, and 26.5% over the long term. The past three quarters have produced double- digit earnings surprises. Read the full analysis on CPLA now!
Tiffany & Co. (TIF), a Zacks #1 Rank stock, exceeded analysts' earnings expectations in three out of the past four quarters by an average margin of 20.9%. After posting solid second- quarter results, the company upped its full-year profit and revenue guidance. Analysts responded by boosting their earnings estimates. On Aug 16, the Board of Directors increased its quarterly cash dividend by 25% to 15 cents per share of common stock from 12 cents. TIF has a current dividend yield of 0.93%. Read the full analysis on TIF now!
Warner Chilcott Limited (WCRX) is doing everything right and its shareholders appreciate it. The company reported outstanding second-quarter earnings and guided higher. Earnings estimates are rising. Over the past month, this year's estimates have risen six cents to $1.02 per share. The company has posted three double-digit earnings surprises in a row. The chart is looking solid, and only needs to eclipse the resistance around $20.50 to be off to the races. Read the full analysis on WCRX now!
W-H Energy Services, Inc. (WHQ), which was last featured as a Value pick on May 11, has returned 10%. The company exceeded analysts' earnings expectations for the past seven quarters by an average margin of 14.7%. WHQ reported solid second-quarter and year-to-date results in late July. Consensus earnings estimates have been trending higher for this Zacks #1 Rank stock. WHQ is currently trading at a valuation of 13.4x current fiscal-year estimated earnings and at 11.9x next fiscal-year estimated earnings. Read the full analysis on WHQ now!
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 we highlight...
Profit Track: Upgrades and Revisions
This strategy focuses primarily on Positive EPS Estimate Revisions and Brokerage Rating Upgrades. Over the last 20 years Zacks Investment Research has proven that earnings estimate revisions are the most powerful force driving stock prices. Studies have also shown that stocks receiving upward EPS revisions tend to receive additional upward revisions in the future. Then consider that stocks receiving these upward revisions generally have brokers upgrading their Ratings, which is also a proven mover of stock prices. There are other parameters to this strategy, but the Rating Upgrades and positive EPS Revisions are the two powerful active ingredients.
Here are four stocks that make the grade for the Upgrades and Revisions Profit Track:
Air Methods Corp. (AIRM) announced second-quarter results in early August. Earnings per share of 63 cents more than doubled last year's 31 cents and surpassed the consensus estimate by 21%. The company noted that its quarterly results were in line with expectations and reflect continued strength in reimbursement, lower maintenance expense, and relatively consistent flight volume. AIRM produced earnings per share growth of 40% over the past five years. Continue your research on AIRM now!
Applied Industrial Technologies, Inc. (AIT), a Zacks #1 Rank (Strong Buy) company, recently hit a 52-week high and is currently trading slightly below that level. In early August, the company reported fiscal fourth-quarter earnings of 56 cents per share, outperforming last year's 44 cents and eclipsing the consensus estimate by 19%. Net sales for the fourth quarter increased by 4.7% on a year-over-year basis. The company noted that fiscal 2007 was a record sales year, though the economic expansion was less robust than it was a year ago. AIT experienced earnings per share growth of 52% over the past five years. Continue your research on AIT now!
The Chubb Corporation (CB), another Zacks #1 Rank (Strong Buy) name, recently declared a quarterly dividend of 29 cents per share payable October 9, 2007 to shareholders of record on September 21, 2007. The company posted second-quarter results in late July, which included record operating income of $1.60 per share, compared to last year's $1.35. The result was 16% above analysts' expectations. The company increased its operating income guidance for the full-year 2007 to a range of $5.70 to $6.10. The company's previous range was $5.00 to $5.40. Wall Street is in agreement as evidenced by current 2007 estimates of $6.02 per share, up from the two month-ago level of $5.63. CB sports earnings per share growth of 29% over the past five years. Continue your research on CB now!
Itron, Inc. (ITRI) satisfies the criteria for this Profit Track with earnings per share growth of 27% over the past five years. The company released record second-quarter results in early August. Earnings per share of 89 cents topped the consensus estimate by 48% and improved on the year-ago result. Quarterly revenues of $402 million soared past the previous year's $164 million. Continue your research on ITRI 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”.
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Kevin Matras shows how to pick the best industries with the Zacks Rank, and offers a unique way to create tie-breakers: More...
3. ZACKS EQUITY RESEARCH
We are pleased to be joined by Director of Small-Cap Institutional Research Ian Gilson, CFA, Ph.D. We are first going to start with an update on the flat-panel display market.
This is an update from an interview we did about six months ago, is that correct?
Correct. We discussed the panel market at that time; now I'm going to focus more on the TV market.
This is a high-growth market. The market at the moment is growing over 65% in units and 35% revenue. And, compounded annually, [this will continue] probably over the next five years. As the numbers indicate, this is a typical consumer electronics market with significant price declines - 35-40% - offset by an improvement in performance and size at which, in the TV market, is about 1.2% per month.
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Although the bulk of the market is currently at 35 to 32 inches, we are seeing the highest growth in the 46 to 52-inch part of the market. Which on a year-over-year basis is growing at well over 2000%. Let me interrupt you here for a second. Are these pretty much in-line with what your predictions were earlier in the year? They are actually better. In my opinion, and certainly on the revenue side, we have seen some price improvement - or should I say fewer price declines - as I had anticipated. This is primarily due to the fact that the flat-panel people - those who make the actual panels that you look at - were not making any money in the first six months, and they increased prices and those prices actually stuck. But it is very, very much a segment basis, and I'd like, if you wish, to go through some of the technology to define the segments a little more clearly. Most definitely. We have three major technologies: the liquid crystal, or LCD, market; the plasma market and the rear-projection market [which we won't get into at this time]. The plasma market is still the best market for very large screen sizes. It has some performance advantages in contrast and particularly brightness, but the LCD market is overcoming those technology shortfalls.Plasma is growing in units, but is flat-to-down in revenue. Although it's up year-over-year, on what you might call a seasonally adjusted basis. Month by moth, it is declining. Now plasma were always the most expensive flat-panel types- No, plasma is actually a less expensive technology. So for the same screen size, LCDs were more expensive. And when you get over 55 inches, LCD is still more expensive than plasma. The LCD market is where the action is. It's the fastest section in growth, and it is also the largest market. In '07, we expect the market to exceed 70 million units and reach close to $70 billion on a world-wide basis. It's a segmented market, with tier-1 companies primarily being brand names that we all know, like Sony (SNE), Sharp, Samsung, Philips (PHG), Sanyo. Tier-2 includes, again, many brand names like Hitachi (HIT), Lucky Goldstar, Mitsubishi, Panasonic, Toshiba. These are names we recognize because of their consumer franchises. Sure - for many decades now. For many decades. Particularly Sony, for example, which is well-known for its quality. And they get a premium price because of that. But the largest group and the largest growing group are companies that we have never heard of. Names that we do not know and have not known. One of which, for example, is Vizio. Vizio, in the past six months, has grown three to four times faster than anybody else in the industry. The reason is that they have gained a position in Costco (COST) and in Wal-Mart (WMT). If you walk into Costco, you'll see Vizio after Vizio after Vizio. They are a privately owned Taiwanese company, and they are now the number-one supplier in the United States of LCD TVs. Looking at the components, they are very important because there are so many people that are only builders - they do no research, they buy components from third parties, have them assembled, and then they are distributors - and not manufacturers.
Ian T. Gilson, CFA, Ph.D is the Director of Small-Cap Institutional Research for Zacks & Company.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include H.J. Heinz (HNZ), Crocs (CROX), National Semiconductor (NSM) and Overseas Shipholding Group (OSG). To see their latest posts, click here.
Listen to the audio podcast of Earnings Trends through Zacks' NEW Audio Feature.
Estimate Revisions Fall Into the Neutral Zone
4. INVESTMENT IDEAS
The editors at Zacks.com constantly analyze the universe of stocks to find the best investment ideas. Today, learn how you can profit from Internet stocks:
Investing was fun in the late 1990's. There was a whole new revolution afoot, and millions of people profited. Many quit their day jobs because they were so successful daytrading and making money off of the Internet boom.
So a generation of traders was born who thought there was nothing to the whole investing game. Just as the last giddy people were handing in their resignation letters in March 2000, the bubble burst, and all those Internet wannabes fell from $300 to $3, and sometimes much less. Then all those temporary millionaires had to go crawling back to their bosses.
But there had to be something of substance within all that euphoria, right? Some of those companies were there before the bubble, thrived during it, got hit after it, and are back to thriving now. Some of these companies are solid, blue chippers that haven't returned to their old heights and are damaged goods in some investors' minds. But there is some good stuff in the industry that can make you money. Here are a few:
Priceline.com (PCLN) has been nothing short of spectacular over the past two years. This company was left for dead along with many of the other dot-coms, but management has really done wonders. European business is booming, which is helping to fuel strong earnings growth. The stock has risen from the $20's to the $80's over the past two years and in all likelihood the move isn't over.
PCLN is currently a Zacks #1 Rank, and also ranked first in its industry of 25. This is a testament to how far this company has come. Over the past month, this year's earnings estimates have soared 47 cents to $3.31 per share. Analysts expect 23% earnings growth in 2008 on top of 85% growth in 2007.
Amazon.com (AMZN) is a name that nobody will forget. In many ways, this stock was the poster boy of the excess that was the Internet bubble. It was slapped with a $400 price target, which was outrageous. Even more bizarre, the stock soon blew through that target. This was all while the company was bleeding red ink and failing to make a dime.
It is a whole new ballgame for Amazon now. It is a legitimate company that is making a lot of money and growing strongly. Analysts are expecting 143% earnings growth for 2007 followed by 38% next year. Earnings estimates for this year have risen six cents to $1.10 per share over the past month. The company has posted four consecutive earnings surprises, with three in double digits.
5. 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.
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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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