Zacks Investment Research - Zacks Industry Rank Analysis

Shifting into Overdrive - Zacks Industry Rank Analysis

John Blank — Mon, 20 May 2013 08:09:01 GMT

As the ice roads of commerce thaw, more people and businesses are hitting the highway with the demand for automotive essentials in tow. Last week, original equipment manufacturing for automotive and trucking was coasting at #48 on the Zack’s Industry Rank list, but this week it found high gear.

Automotive/Trucking Original Equipment now enjoys a Zack’s Industry Rank of #36.

This industry of 31 companies has recently seen 88 positive revisions to annual earnings estimates compared to 38 negative revisions. Positive estimate revisions have been averaging a strong +24%. Of course, downward earnings surprises are present, however, the sector has signaled a turn for the positive and a couple key businesses seem to have the green light.

We’ve also seen this trend reflected in corresponding sectors, including positive movement in Retail/Wholesale Automotive and Trucking, up five on the Zacks Industry Rank this week.

With continued spending, there are important indicators that this demand will drive future positive earnings estimate revisions. Additional favorable analysis of the industry as a whole would reflect this development.

Significant revision of the Zacks Rank within a sector, changing from a Hold to either a Buy or Strong Buy rank is fundamental when looking for advantages. Using this information and knowledge of recent positive estimate activity can provide more insight into the direction of a particular company.

Look closely at the following summaries of two recent earnings surprise candidates. Each was selected based on its current Zacks Rank #1 (Strong Buy) and revision from Zacks Rank #3 (Hold) just one week ago.

Your profits could mirror these successes and may be closer than they appear.

Federal Mogul (FDML)

FDML is a Zacks Rank #1 (Strong Buy). It moved up from Zacks Rank #3 (Hold) just last week. This company reports quarterly earnings on July 25, 2013.

Federal Mogul Corporation is a leading global supplier of powertrain, chassis and safety technologies, serving original equipment manufacturers of automotive, light commercial, heavy-duty, agricultural, marine, rail, off-road and industrial vehicles. Their most recent earnings surprise was +165% for Q1.

Visteon Corp (VC)

VC is a Zacks Rank #1 (Strong Buy). It was raised to its #1 rating within the last week from Zacks rank #3 (Hold). It reports earnings on August 8, 2013.

Visteon Corp. operates as an automotive supplier engaged in the design, engineering and manufacturing of climate, electronic, interior and lighting products for vehicle manufacturers. It broke estimates in Q1 with +75% earnings surprise.

FEDERAL MOGUL-A (FDML): Free Stock Analysis Report

VISTEON CORP (VC): Free Stock Analysis Report

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Industry Rank Analysis: Fair Game - Zacks Industry Rank Analysis

John Blank — Wed, 08 May 2013 17:12:01 GMT

Last week, the gaming industry wasn’t attracting much attention at #182 on the Zack’s Industry Rank list. Warm-weather travel plans and increases in discretionary spending, however, are giving many dealers a nice hand.

This week, the Gaming Industry has a Zacks Industry Rank of #75.

Within the Gaming Industry of 29 companies, there have been 72 recent positive revisions to annual earnings estimates compared to 21 negative revisions. Positive estimate revisions have been averaging +13%. While there are downward earnings surprises, the sector as a whole is reflecting a trend and a few choice players in the game should be watched.

The Gaming Industry benefits from consumer confidence and vacation planning. We’ve also seen positive movement in related industries, such as Leisure and Recreational Services (Zacks Industry Rank #9).

Given the positive market sentiment lately, there are reliable indicators that this trend will continue and encourage future positive earnings estimate revisions. More favorable analysis of the sector is a likely outcome.

Sizeable upward Zacks Rank company movement within a group, changing from a Hold to either a Buy or Strong Buy rank is vital. Recent positive estimate activity can be used to the advantage of the informed investor. Glance over the brief descriptions of our two recent earnings surprise candidates. Each was selected based on its current Zacks Rank #1 and the size of recent positive earnings surprises.

Play your cards right, and you may have some earnings surprises of your own.

Monarch Casino (MCRI)

MCRI is a Zacks Rank #1 (Strong Buy). It moved up from Zacks Rank #4 (Sell) just last week. This company reports quarterly earnings on July 25, 2013.

Monarch Casino & Resort, Inc., through its wholly-owned subsidiary Golden Road Motor Inn, Inc., owns and operates the tropically-themed Atlantis Casino Resort in Reno, Nevada. This casino reported a recent +52% Q1 earnings surprise.

Multimedia Game (MGAM)

MGAM is a Zacks Rank #1 (Strong Buy). It was raised to its #1 rating within the last week. It reports earnings on August 6, 2013.

This developer and supplier of systems, content, electronic games and player terminals for the Native American gaming market surprised on its Q1 EPS with a +47% jump.

Multimedia Game develops video lottery systems, sweepstakes markets and other products for domestic and international markets, as well as promotional and coupon gaming systems.

MULTIMEDIA GAME (MGAM): Free Stock Analysis Report

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Industry Rank Analysis: Knock on Wood - Zacks Industry Rank Analysis

John Blank — Tue, 16 Apr 2013 06:13:01 GMT

Jumping up Zacks Industry Ranks in response to revitalized real estate demand.

Sitting just last week at #192 on the Zack’s Industry Rank list, strong recent demand for building materials --and upgrades to earnings estimate revisions that followed-- pushed key players in the timber industry back into the spotlight.

This week, the Building Products/Wood Industry enjoys a Zack’s Industry Rank of #32.

Within the Building Products/Wood Industry of eight companies, there have been 5 recent positive revisions to annual earnings estimates and 0 negative revisions. Positive estimate revisions have been averaging +15%. Admittedly, there are also a couple of sour earnings surprises to report too.

Construction benefits directly from strong home construction volumes and rapidly improving home prices. Industrial, Retail and Commercial demand for building products and wood has rebounded smartly too.

Given the diverse sources in market demand for these products, there’s reason to believe demand trends will continue to provide positive revenue growth support and further upward earnings estimate revisions. More favorable activity by the sector’s analysts should follow.

Sudden upward Zacks Rank company movement within a group, moving from a Hold to either a Buy or Strong Buy rank is important. It reflects fresh earnings estimate activity a savvy investor can take advantage of. Glance over the brief descriptions of our two Q4 earnings surprise candidates. Each was selected based on its current Zacks Rank #1 and the recent magnitude in positive earnings surprises.

Note: Q1-13 quarterly reporting arrives for both of these companies the third week of April.

Plum Creek Timber (PCL)

PCL is a Zacks Rank #1 (Strong Buy). It moved up from a hold just last week. This publicly-held timber REIT reports quarterly earnings on April 29, 2013.

The lumber, plywood, and medium density fiberboard (MDF) producer offers an annual cash dividend of $1.68 which yields a nice 3.2% return, and showed us a recent +69% Q4 earnings beat. Plum Creek Timber is the second largest private timberland owner in the United States, with approximately 7.8 million acres of timberlands located in 19 states. Their timberlands are well diversified, not only by species mix, but also by age distribution.

Weyerhaeuser Co (WY)

WY is a Zacks Rank #1 (Strong Buy). It was bumped to its #1 rating within the last week. It reports earnings on April 26, 2013.

The producer surprised on its Q4 EPS with a +37% beat.

Weyerhaeuser Company is principally engaged in growing and harvesting timber; the manufacture, distribution, and sale of forest products; real estate development and construction; and other real estate related activities. Its business segments are timberlands; wood products; pulp, paper and packaging; and real estate and related assets.

PLUM CREEK TMBR (PCL): Free Stock Analysis Report

WEYERHAEUSER CO (WY): Free Stock Analysis Report

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Invest in Pockets of Semiconductor Strength - Zacks Industry Rank Analysis

John Blank — Tue, 02 Apr 2013 09:14:01 GMT

What is consistently ranked an Outperform sector by both buy-side and sell-side over the last two years? -- The Info Tech Sector.

In light of this dominant and persistent top-down investing recommendation, look further for top Zacks Ranked industry segments inside IT. This can help drive your chosen stock’s outperformance. Furthermore, align closely with the most favorable IT growth segments and the most resilient value propositions.

At the very base of the IT industry is the semiconductor industry. Semi industries have recently shown us a flurry of Zacks Industry Rank earnings driven upgrades.

On April 1, Semiconductor Industry Association (SIA) president and CEO Brian Toohey wrote this on the front of SIA’s industry website, “Despite persistent economic uncertainty, the global semiconductor industry is off to a promising start in 2013.” Growth has been underpinned by strength in memory sales and is ahead of last year's pace.

Semiconductor year-to-date sales through February 2013 were +2% percent higher than at the same point last year. Regionally, year-over-year sales increased in Asia Pacific (+6.7%) and the Americas (+1.6%), but decreased in Europe (-1.5%) and Japan (-15.7%).

In addition, a solid value proposition in reducing energy demand in new chips can be a source of ongoing competitive advantage. This is behind earnings strength in top Zacks Ranked stocks CREE and AEIS, discussed below. Both target the manufacture of a lower energy using and therefore cost-reducing semiconductor.

Top Ranked Zacks Semiconductor Industries to Consider

To think correctly about the semiconductor manufacturing industry as an investor, a vertical integration structure is helpful. Vertical integration serves as the main semi differentiator.

Four types of semiconductor industry silos exist in that context:

Integrated device manufacturers (IDMs). These companies design, manufacture and sell their chips. Think of chipmakers like Intel (Zacks Rank #3), Samsung, Sandisk (Zacks Rank #1) and STMicroelectronics (Zacks Rank #3).
Fabless manufacturers. These companies design and sell chips, but outsource manufacturing to foundry companies. Think of businesses like Qualcomm (Zacks Rank #2), NVIDIA (Zacks Rank #3), Cree, Inc. (Zacks Rank #2) and AMD (Zacks Rank #3). Or consider a Chinese mainland fabless company like RDA Microelectronics (Zacks Rank #1).
Foundry companies. Foundry companies manufacture chips designed and sold by their customers, especially the above fabless companies. Think about models like the Taiwan Semiconductor Manufacturing Corp (TSM, Zacks Rank #3, but a Zacks Rank #1 a week ago), the world’s first semiconductor foundry and still the leader. Or its close follower, United Microelectronics Corp. (UMC, Zacks Rank #4) Taiwan's first semiconductor company formed in 1980 as a spin-off of government-sponsored Industrial Technology Research Institute (ITRI).
At the bottom of the vertically integrated supply chain, consider a specialty semi supplier-to-foundry company like American Energy (Zacks Rank #1).

Type 1

A leader in the four company Semiconductor Memory Industry is SanDisk Corp. (SNDK) at a Zacks Rank #1.

The industry rank is currently 15 out of 265, up a massive +193 in the ranks in just one week, mostly due to its small industry size of four companies. When a key rank improves, it matters. The industry has seen 15 positive annual earnings estimate revisions and just 8 negative revisions recently.

SNDK is a flash memory (SIA’s strongest growing segment) company in this industry. It easily qualifies as an Integrated Device Manufacture (IDM) type of company. The company designs, manufactures, and markets flash memory storage products that are used in a wide variety of electronic systems. One notable competitor is Micron.

SNDK is a current Zacks Rank #1 (Strong Buy) with an Outperform rating.

Sandisk reports its Q1-13 earnings on April 18. It reported Q4-12 adjusted earnings of $0.99 per share in January, crushing the Zacks consensus estimate of $0.68. Results were +135.7% above prior quarter levels. The beat was mainly attributed to solid recovery in the mobile embedded and retail businesses, strong geographic contributions, and favorable supply/demand metrics. Expected annual earnings growth is +13% a year, well above the S&P 500 median.

Total revenues for the fourth quarter were $1.54 billion up +21.1% from the previous quarter. The Q4 result came in slightly above the Zacks consensus estimate of $1.52 billion and within the company s guidance.

SanDisk is fairly valued at its current P/E multiple of 16x 2013’s EPS estimate of $3.41, a premium to the industry average. Its Price to Earning Growth (PEG) ratio remains a low 1.22.

Type 2

The Semiconductor – Discretes Industry offers us Cree Inc. (CREE) at a Zacks Rank #2.

This Zacks industry has three companies in it. It is currently a #35 rank, down -3 in the last week. The industry has recently seen six upgrades to earnings estimates and zero downgrades.

CREE is an example of a fabless manufacturer. The stock is a large cap blend stock with a Zacks neutral rating. This stock sports a nosebleed 56 forward PE ratio. High earnings growth expectations must be met, quarter after quarter, without a miss.

Cree, Inc. is a manufacturer of semiconductors that enhance the value of solid-state lighting, power, and communications products by significantly increasing their energy performance and efficiency.

Key to Cree's market advantage is its world-class materials expertise in silicon carbide and gallium nitride for chips and packaged devices that can handle more power in a smaller space while producing less heat than other available technologies, materials and products.

Cree drives its increased performance technology into multiple applications, including exciting alternatives in brighter and more-tunable light for general illumination; backlighting for more-vivid displays; optimized power management for high-current switch-mode power supplies and variable-speed motors; and more-effective wireless infrastructure for data and voice communications.

Cree customers range from innovative lighting-fixtures makers to defense-related federal agencies.

The Semiconductor Analog & Mixed Industry is at a Zacks Industry Rank of #71 out of 265.

There is a full set of 17 companies to look into here. Recently, the industry has seen four earnings estimate upgrades and zero downgrades.

It offers us RDA Microelectronics, Inc. (RDA) at a Zacks Rank #1. RDA also gets a Zacks Outperform rating.

RDA operates as a fabless semiconductor company that designs, develops and markets radio frequency and mixed-signal semiconductors for a broad range of cellular, broadcast and connectivity applications.

The company's product portfolio includes power amplifiers, transceivers and front-end modules, FM radio receivers, set-top box tuners, analog mobile television receivers, walkie-talkie transceivers, LNB satellite down converters and Bluetooth system-on-chip.

Its analog application is sold in China, Southeast Asia, India, the Middle East, Africa, Russia, and Latin America. RDA Microelectronics Inc is headquartered in Shanghai, People's Republic of China.

Also, consider companies that fall in the Wireless Equipment industry.

This industry currently has a Zacks Industry rank of #107 out of 265. There are 23 companies here.

A safe investment is QUALCOMM, Inc. (QCOM).

QCOM is a Zacks Rank #2, with a Zacks Outperform rating. Its Price and Consensus chart looks very favorable for 2013 and 2014 earnings outlooks.

QCOM develops and delivers chips destined for wireless communications products (cellphones) and services based on the company's CDMA digital technology. The forward PE ratio is a lower 16, with a very nice PEG ratio of 1.09.

Expected annual earning growth is strong at +15%.

Type 3

The third vertical to consider is the Semi Fab Foundry Industry itself.

This group carries a Zacks Industry rank of #113 out of 265, with just two companies in it. One is the dominant Taiwan Semiconductor Manufacturer Co (TSM). This is a large-cap stock that sported a Zacks Rank #1 a week ago, and is now a #3. It has a neutral rating.

TSM is the world's largest dedicated integrated circuit (IC) foundry. As a foundry, the Company manufactures ICs for its customers based on their proprietary IC designs using its advanced production processes. TSM's goal is to establish itself as one of the world's leading semiconductor companies by building upon the strengths that have made it the leading IC foundry in the world.

The forward PE is 16.9 and the stock pays a nice 2.4% dividend.

Type 4

At the bottom of the value chain is the Semiconductor Equipment/Wafer Fabrication industry.

This industry has six companies. It currently shares the #15 rank with the Semiconductor Memory Industry, down -1 from last week. The industry has seen two positive earnings estimate revisions and no negative revisions recently.

The industry offers us Advanced Energy (AEIS) at a current Zacks Rank #1. This small cap blend stock gets a Zacks Outperform rating, too.

In effect, Advanced Energy supplies semiconductor foundry companies and others. It creates solutions that maximize process impact, improve productivity, and lower the cost of ownership for its customers.

The company manufactures power conversion and control systems used in plasma-based thin film production equipment. Company's systems are integrated into semiconductor, data storage, flat panel display, and other industrial manufacturing equipment that utilize gaseous plasmas to deposit or etch thin film layers on materials, or substrates such as silicon and glass.

Advanced Energy operates in regional centers in North America, Asia and Europe. It offers global sales and support through direct offices, representatives, and distributors,

Note: AEIS has one sell rating, and one strong sell rating among its four ratings, due to overvaluation concerns. The stock sports an 18 forward price-to-earnings (PE) ratio.

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Zacks Investment Research

Take a Look at Western Banks - Zacks Industry Rank Analysis

John Blank — Tue, 19 Mar 2013 16:39:01 GMT

On March 14, 2013, I was looking for a strong candidate to flag in a top-down industry context.

I came upon the Western U.S. Regional Banks.

It enjoys a high Zacks Industry Rank at #21, up +7 in the ranks from last week. I decided to stop there. Only one Zacks Ranked regional bank region stands above it. That is the Southeast region at #14, up +3.

Inside this West Region Bank industry are 41 banks. There have been 15 positive revisions to annual earnings recently, and only 4 negative revisions.

What really struck me is 19 of 41 banks in this group have a Zacks Rank of #1 or #2. Half of West Region banks are ranked at a Buy or Strong Buy based on earnings estimates. That has to mean a strong set of positive, regional economic undercurrents is in play, which an investor can benefit from.

This Western region does benefit disproportionately from a number of positive economic trends inside the USA.

Housing construction and home prices are now rising well above the national average. Industrial, Retail and commercial has rebounded too.
The IT industry is concentrated on the West Coast.
This region enjoys demographic growth above the national trend.
Throw in fresh support from strong positive job growth numbers. This was one of this region’s concentrated problem areas.

In light of all positive trends, this region’s banking system stands to reason as a place to find a good stock.

Take a read through the following brief descriptions of four candidates. I chose each one based on its current Zacks Rank (#1 or #2) and Zacks Rating (Outperform), its diverse location, and overall sentiment scores.

I also wanted banks that reflect well the underlying fundamental trends in play.

Note that Q1-2013 quarterly reporting arrives for these banks in the third week of April -- a month away.

Columbia Banking System, Inc. (COLB)

Zacks Rank #1 (Strong Buy) with an Outperform rating. This bank offers a dividend yield of 2.0%, and +14% EPS growth over the last five years. It reports quarterly earnings on April 24, 2013.

COLB is a registered bank holding company whose wholly owned subsidiary, Columbia State Bank, It conducts a full-service commercial banking business.

Headquartered in Tacoma, Washington, the company provides a full range of banking services to small and medium-sized businesses, professionals and other individuals through banking offices located in the Tacoma metropolitan area and contiguous parts of the Puget Sound region of Washington, as well as the Longview and Woodland communities in southwestern Washington.

Western Alliance Bancorporation (WAL)

Zacks Rank #1 (Strong Buy) with an Outperform rating. The bank has seen notable consensus earning estimate revisions over the last 30 days. It reports earnings on April 18, 2013.

WAL is the parent company of Alliance Bank of Arizona, Bank of Nevada, First Independent Bank, Torrey Pines Bank, and Western Alliance Equipment Finance. These dynamic companies provide a broad array of services to clients in Nevada, Arizona and California.

Western Alliance Bancorporation is a leading bank holding company in the Southwest, headquartered in Phoenix, with banking subsidiaries in Arizona, California, and Nevada. The company provides services to businesses, entrepreneurs, professionals, nonprofit organizations and consumers seeking the robust product array of a national bank with the individual, personal attention of a community bank, delivered through a dedicated, local Relationship Manager.

Bridge Capital Holdings (BBNK)

Zacks Rank #2 with an Outperform Rating, but it was a Zacks Rank #1 a week ago. Small Cap Value stock. Supports the Info Tech business in the Bay area. NO dividend. It reports earnings on April 25. 2013.

BBNK is the holding company for Bridge Bank, a full-service business bank that is dedicated to meeting the financial needs of small and middle-market, and emerging technology businesses in the Silicon Valley, Palo Alto, Sacramento, San Diego, and Fresno business communities. Bridge Bank provides clients with a comprehensive package of business banking solutions delivered through experienced and professional bankers.

Bank of Hawaii Corporation (BOH)

(Note: We are re-issuing this article to correct a problem. The original version, published March 14, 2013, should no longer be relied upon.)

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Zacks Investment Research

Take a Look at Western Banks - Zacks Industry Rank Analysis

John Blank — Thu, 14 Mar 2013 06:17:01 GMT

Housing construction and home prices are now rising well above the national average. Industrial, Retail and commercial has rebounded too.
The IT industry is concentrated on the West Coast.
This region enjoys demographic growth above the national trend.
Throw in fresh support from strong positive job growth numbers. This was one of this region’s concentrated problem areas.

Zacks Rank #1 (Strong Buy) with an Outperform rating. The bank has seen notable consensus earning estimate revisions over the last 30 days. It reports earnings on April 18, 2013.

WAL is the parent company of BankWest of Nevada, Alliance Bank of Arizona, Torrey Pines Bank, Miller/Russell & Associates, and Premier Trust. These dynamic companies provide a broad array of banking, leasing, trust, investment, and mortgage services to clients in Nevada, Arizona and California.

Staffed with experienced financial professionals, these organizations deliver a broader product array and larger credit capacity than community banks, yet are empowered to be more responsive to customers' needs than larger institutions.

Bridge Capital Holdings (BBNK)

Zacks Rank #2 with an Outperform Rating, but it was a Zacks Rank #1 a week ago. Small Cap Value stock. Supports the Info Tech business in the Bay area. NO dividend. It reports earnings on April 25. 2013.

BBNK is the holding company for Bridge Bank, a full-service business bank that is dedicated to meeting the financial needs of small and middle-market, and emerging technology businesses in the Silicon Valley, Palo Alto, Sacramento, San Diego, and Fresno business communities. Bridge Bank provides clients with a comprehensive package of business banking solutions delivered through experienced and professional bankers.

Bank of Hawaii Corporation (BOH)

Zacks Rank #2 with a Neutral rating. Unlike the other banks above, it offers a healthy 3.6% dividend. It reports on April 22, 2013.

BOH is a regional financial services company serving businesses, consumers and governments in Hawaii, American Samoa and the West Pacific. The company's principal subsidiary, Bank of Hawaii, was founded in 1897 and is the largest independent financial institution in Hawaii.

BRIDGE CAP HLDG (BBNK): Free Stock Analysis Report

BANK OF HAWAII (BOH): Free Stock Analysis Report

COLUMBIA BK SYS (COLB): Free Stock Analysis Report

WESTERN ALLIANC (WAL): Free Stock Analysis Report

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Construction on a Tear - Zacks Industry Rank Analysis

John Blank — Wed, 09 Jan 2013 06:14:01 GMT

Construction Jobs on the Rise

What did I find most encouraging about the December ADP private payroll and Federal government jobs reports?

A revival in construction jobs. Although ADP said rebuilding after Superstorm Sandy likely lifted their December construction jobs gain, this is nevertheless the seventh month in a row for adds to construction. The +39,000 ADP job adds in construction was the best number since February 2006.
ADP financial activities were up +14,000, a 16th month straight positive run. This was the best financial activities job add number since March 2006.

This pair of sectors moves together: one finances projects, the other builds them. What a nice positive feedback loop. It takes the overall macro economy system up in a cyclical fashion.

A serial pick-up in jobs means strong underlying profits. Firms don’t hire workers unless they make strong profits by doing so. This led me to the Construction Sector to look for stock picks.

Zacks Industry Classifications

To look for picks, start at the top. Our expanded industry classification provides a fairly granular view of industries by tracking more than 250 different groups. The Zacks Industry Rank, which derives its predictive power from the time-tested Zacks Rank, then helps us identify the industries that are expected to outperform others.

The top 1/3rd of the Zacks Industry Rank qualify as industries with ‘Good’ prospects, the bottom 1/3rd have ‘Bad’ prospects, and middle 1/3rd as ‘Neutral.’

The definition of size that matters here is not the total sales or market capitalization, but the number of companies in the ‘industry.’ Many of these ‘industries’ have just a few companies in them. It’s not particularly noteworthy if a single small industry shows up doing well. A single firm with good news can propel a one- or two-firm industry to the top (or bottom) of the list.

It is interesting when you see a cluster of similar industries close to the top of the list. This is where we find the construction industries now. The same holds true for the bottom of the list.

Zacks #1 Rank (Strong Buy) Construction Firms

In evaluating Zacks Industry Ranks, you want to see two things: a good overall score (low, meaning more Zacks #1 and #2 Rank stocks than #4 or #5 Rank stocks) and some improvement the relative position from the prior week.

It also helps to understand exactly what the Zacks Industry Rank is. The Zacks Industry Rank is the un-weighted average of the individual Zacks ranks of the firms in that industry. It does not matter if the stock is the 800-pound gorilla that dominates the industry or some very small niche player in the space -- they have the same influence on the Industry Rank.

Also, that means the bigger the industry in terms of number of firms, the less influence any given company has on the Industry Rank. It also implies small industries, with just two or three firms, should be the ones found at either the top or the bottom of the list. Thus, we do not always focus on the very highest-rated industries, but on the highest-rated ones in which there are a large number of firms.

Construction Groups

Zacks breaks up the construction sector into ten groups of companies. One falls in the retail/wholesale industry, the rest make a product or provide a service. Nine of the ten Zacks industry groups showed up in the top 1/3rd of all industries, meaning they have ‘Good’ prospects.

Three very small industries, by number of companies, ranked very high in Zacks Industry Ranks in the first week of January 2013:

Manufactured Housing/Recreational Vehicles (3 names, #2 Zacks Industry Rank, unchanged),
Paint and Related Products (4 names, #6 Zacks Industry Rank, up +7 in past week),
Building Products – Air and Heating (4 names, #18 Zacks Industry Rank, up +33 in past week).

The next six groups fell into ranks from #35 to #72, in the top 1/3rd of all industries. But these groups had more companies, which means these Zacks Ranks probably mean something more here, even at a lower rank.

Building – Cement (9 names, #26 Zacks Industry Rank, up +8 in past week)
Building Products – Retail/Wholesale (8 names, #49 Zacks Industry Rank, up +41 in past week)
Building – Residential (16 names, #49 Zacks Industry Rank, up +2 in past week.
Building – Heavy Construction (15 names, #65 Zacks Industry Rank, down -17 in past week)
Building Products – Wood (6 names, #72 Zacks Industry Rank, up +42 in past week),
Building & Construction – Misc. (19 names, #81 Zacks Industry Rank, up +13 in past week)

A remaining group, Engineering R&D Services (16 names, #215 Zacks Industry Rank, down -17 in past week), fell into the bottom 1/3rd -- a ‘Bad’ outlook. This is the construction sector dedicated solely to providing services.

Interestingly, Engineering R&D Services was the construction group whose leading companies focused on providing services to government entities. Its two top-ranked companies were located in California (Willdan Group [WLDN] and National Technical Systems [NTSC]. Could the wheels be turning in this bellwether state again?

I’d like to organize these ten Zacks groups further into five tighter sets, based on a more coherent and physical vision of a construction “industry.” So I organized the activities of the top Zacks Rank companies as sub-industries, around nodes of final activity. And I put each company in upstream and downstream positions to create a value chain within a given physical sub-industry. This gives me a more tangible sense of what is really going on.

Here are Zacks #1 or #2 Ranked construction companies placed in each of my five physical groups:

I put a star by the company I think looks best in my groups.

Recreational Vehicles:

(1) PATRICK INDUSTRIES, INC. (PATK) Market Cap $176M. Patrick Industries is a manufacturer and supplier of building products and materials to the manufactured housing and recreational vehicle industries. In addition, they are expanding as a supplier to certain other industrial markets, such as furniture manufacturing, marine and the automotive aftermarket. They manufacture decorative vinyl and paper panels, cabinet doors, countertops, aluminum extrusions, drawer sides and wood adhesives.

*(2) THOR INDUSTRIES, INC. (THO) produces and sells a wide range of recreational vehicles and small and mid-size buses in the United States and Canada as well as related parts and accessories. The Company also manufactures axles and suspension systems.

(3) WINNEBAGO INDUSTRIES, INC. (WGO) is a leading U.S. manufacturer of motor homes, self-contained recreation vehicles used primarily in leisure travel and outdoor recreation activities. Motor home sales by the Company represented more than 87 percent of its revenues in each of the past five fiscal years. The Company's motor homes are sold through dealer organizations primarily under the Winnebago, Itasca, Vectra, Rialta and Luxor brand names.

Telecom Infrastructure:

(1) CHASE CORP. (CCF) Market Cap $170M. Chase manufactures insulating and semi-conducting electrical cable tape wrappings, cable filling compounds, anti-corrosion mastics, reinforced rubber and asphalt tapes and bridge deck corrosion barrier membranes. Its principal products are protective coatings and tape products sold in national and international markets.

*(2) DYCOM INDUSTRIES, INC. (DY) is a leading provider of specialty contracting services throughout the United States. These services include engineering, construction, maintenance and installation services to telecommunications providers, underground locating services to various utilities including telecommunications providers, and other construction and maintenance services to electric utilities and others.

(3) MASTEC INC. (MTZ) is one of the largest providers of construction services to the telecommunications industry in the United States. The Company's principal business consists of the installation and maintenance of aerial, underground and buried copper and fiber optic cable, underground conduit, manhole systems and related construction for local telephone companies, including Regional Bell Operating Companies such as BellSouth Telecommunications, Inc., U.S. West, Inc. and SBC Communications, Inc., and non-Bell local telephone companies such as Sprint Corp., and GTE Corp.

Housing:

(1) POTLATCH CORP. (PCH) is an integrated forest products company with substantial timber resources. It is engaged principally in the growing and harvesting of timber and the manufacture and sale of wood products, printing papers and pulp and paper products. Its timberlands and all of its manufacturing facilities are located within the continental United States (Zacks Rank #1).

(2) HOME DEPOT (HD), LOWES CO. (LOW) and BUILDERS FIRSTS (BLDR) (all Zacks Rank #2).

*(3) HOVNANIAN (HOV), MDC HOLDINGS (MDC), *RYLAND (RYL) and LENNAR CORP (LEN) (all Zacks Rank #2). Homebuilders.

Commercial and Industrial Construction Contractors mainly (also helps apartments and homeowners):

(1) EAGLE MATERIALS INC. (EXP) is a Dallas-based company that manufactures and distributes Cement, Gypsum Wallboard, Recycled Paperboard and Concrete and Aggregates (Zacks Rank #1).

*(2) COMFORT SYSTEMS USA, INC. (FIX) is a national provider of comprehensive heating, ventilation and air conditioning installation, maintenance, and repair and replacement services. They operate primarily in the commercial and industrial HVAC markets, and perform most of their services within manufacturing plants, office buildings, retail centers, apartment complexes and healthcare, education and government facilities.

*(3) UNITED RENTALS, INC. (URI) is one of North America's largest equipment rental companies with over branches in the majority of states, several Canadian provinces and Mexico. The company offers for rent different types of equipment to customers that include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and others.

Engineering R&D Service Providers (least attractive industry within construction):

(1) WILLDAN GROUP, INC. (WLDN) is a leading single resource provider of specialized outsourced services to small and mid-sized public agencies located primarily in California and other western states. Willdan Group, Inc. assists cities and other government agencies with a broad range of services, including civil engineering, building and safety services, geotechnical engineering, financial and economic consulting, and disaster preparedness and homeland security. Strategically located throughout California and other Western states.

*(2) NATIONAL TECHNICAL SYSTEMS, INC., (NTSC) based in Calabasas, California, is a leading provider of engineering and testing services to the defense, aerospace, telecommunications, automotive and high technology markets. Through a worldwide network of resources, NTS provides full product life-cycle support, offering world-class design engineering, compliance, testing, certification, and quality registration and program management. It provides conformity assessment and management system registration services, as well as technical personnel for product certification, product safety testing, and product evaluation. The company offers management registration and certification services. It operates in the United States, Japan, Vietnam, Germany and Canada.

I also did three screens on top Zacks Ranked stocks in construction. First, I wanted to make sure the picks I made were in the top half on sentiment, measured by the number of Strong Buy brokerage recommendations. Second, I wanted to make sure the picks were registering strong profits from a shareholder perspective, measured by the current return on equity. I did keep picks here that didn’t do as well. Their profit forecasts going forward were much better. Third, I wanted to make sure stock markets hadn’t priced in all of the good news by running up stock valuations. So I ranked them by the price to earnings (P/E) ratio looking forward one year (F1). Anything below a 15 P/E is pricing beneath the S&P 500 in historic terms.

You can see I made tradeoffs here. Not all of my picks cleared all three screens. But the one tradeoff I didn’t make was that each pick comes out of a strong Zacks Ranked Industry; has a top Zacks Rank for that industry; and the underlying macro fundamentals of the entire sector are strong and getting stronger.

My picks were:

Dycom – DY
Comfort Systems – FIX
Ryland Homes – RYL
United Rentals – URI
Thor Industries – THO

Can You Bank on Regional Banks? - Zacks Industry Rank Analysis

Sheraz Mian — Thu, 31 May 2012 06:53:01 GMT

Don’t Overlook the Local Banks

J.P. Morgan’s (JPM) recent $2 billion-and-counting trading loss should justifiably make you wary of the big banks. The black-box nature of these very large banks makes their business model inherently risky and unpredictable. But you don’t need to shun this entire space simply because of these large banks. There are plenty of other operators in the banking space -- mostly the small local/regional players -- that remain in very good shape.

As the economy continues to improve and the bad loans made during the downturn roll off, the condition of the banks’ balance sheets has improved. Consumer delinquencies have been falling as the slowly improving jobs market has been helping heal household finances. Some of the reserves that banks had set aside for bad loans now seem excessive, and those reserves are being released, and less new money has been put aside.

Free raw materials (deposit rates near zero) have made the loans that the banks have been making recently very profitable. As a result, many small banks, which don’t face many of the problems of the big guys, have been showing surprisingly positive earnings. As a result they are performing very positively on the Zacks Industry Rank.

Zacks Industry Classifications

Our expanded industry classifications provide a fairly granular view of the industries by tracking more than 250 different groups. The Zacks Industry Rank, which derives its predictive power from the time-tested Zacks Rank, helps us identify the industries that are expected outperform others. The top 1/3^rd of the Zacks Industry Rank qualify as industries with ‘Good’ prospects, the bottom 1/3^rd have ‘Bad’ prospects, and middle 1/3^rd as ‘Neutral.’

But many of these ‘industries’ have just a few companies in them. So it’s not particularly noteworthy if a single small industry shows up doing well; a single firm with good news can propel a one- or two-firm industry to the top (or bottom) of the list.

It is interesting when you see a cluster of similar industries close to the top of the list. The same holds true for the bottom of the list. The definition of size that matters here is not the total sales or market capitalization, but the number of companies in the ‘industry.’

Breaking Down the Groups

We break up the overall banking sector into five regional groupings, plus a “multi-regional” group that is mostly the very large banks like J.P. Morgan, Citigroup (C) and Bank of America (BAC). We also have a separate “industry” for the foreign banks.

Four of the five regional groupings are all showing up in the top 1/3^rd of all industries, meaning having a ‘Good’ outlook. The remaining one, banks in the Northeast, falls in the middle 1/3^rd -- a ‘Neutral’ outlook. The ‘multi-regional’ group of large banks is also in the top third.

The Southwest region ‘industry,’ with 12 firms in it, is the strongest of the bank groups, coming in 11th place. Texas Capital Bancshares (TCBI) is a Zacks Rank #1 stock in this group. The Southwest group is the smallest of the regional groups and probably the reason it is the best regional grouping. Normally industries in the top 15 have fewer than ten firms in them.

Banks in the Midwest are the next best, in 15th place. The Midwest ‘industry’ has 35 stocks in it. Rosemont, Illinois-based Taylor Capital Group (TAYC), the $400 million market cap parent of Cole Taylor Bank, is one of the Zacks Rank #1 stocks in this group.

Banks in the West are at the 54^th place, while the Southeast region is close to the cut-off for the top 1/3^rd mark at 78^th place. Banks in the Northeast are firmly in the ‘Neutral’ category at 126^th place.

Lesser Known, but Not Lesser Investments

You probably have never heard of most of these banks. Some of them you might recognize if they happen to operate in your town, but it is a fair bet that the names of most of them are new to you.

None of the banks on either of the lists are large caps, and even the mid-caps are on the small side of the range. One could actually take a ‘package approach’ to investing in these banks. You can create a ‘synthetic’ national bank -- one that avoids the regional risk that these banks pose -- by having a portfolio made up of small positions in many of these names, rather than just taking one normal-sized position. Given the thin trading volumes in these names, even an individual investor could impact the price if they tried to take a big portion in just one of these names.

The valuations are for the most part reasonable; not rock bottom, but by no means excessive. And unlike the big boys of the banking world, most of these firms are free to pay whatever dividends their boards deem appropriate. As you can see, many of these small banks provide very attractive dividend yields. Dividends from some like Ohio’s FirstMerit Corp (FMER), Virginia’s First Community Bancshares (FCBC), Kentucky’s Community Trust Bancorp (CTBI) are really juicy.

However, just as a word of warning, they tend to be thinly covered, so an individual analyst raising his or her numbers for the firm has a much bigger impact on the mean estimate than is the case with the big, well-covered banks. Still, higher earnings will allow these banks to pay higher dividends in the future, so if you do buy them and tuck them away, there is a very good chance that your yield on cost will be much higher a few years down the road than is indicated in the tables below.

Zacks # 1 Rank (Strong Buy) Local Banks

Company	Ticker	Stock Price	Mkt Cap (mm)	Beta	Div Yield %	P/E 2012E	P/E 2013E	Price/ Book
Access Natl Cp	ANCX	12.6	$129	0.42	1.9	9.22%	11.72	1.5
Bancfirst Okla	BANF	38.03	$576	0.7	2.8	11.32%	11.32	1.2
Bank Of Ky Finl	BKYF	24.08	$179	0.62	2.5	35.64%	10.12	1.1
Bofi Hldg Inc	BOFI	18.51	$211	0.95	0	7.41%	6.5	1.2
Bridge Cap Hldg	BBNK	14.94	$227	0.61	0	7.96%	14.87	1.7
Central Pac Fin	CPF	13.2	$551	0.83	0	5.30%	11.23	1.2
Encore Bancshrs	EBTX	20.47	$243	1.01	0	6.68%	17.42	1.7
Farmers Cap Ky	FFKT	7	$52	1.17	0	6.50%	12.5	0.4
First Merchants	FRME	11.97	$346	0.83	0.3	20.99%	10.86	0.8
Firstbank Alma	FBMI	10.02	$79	1.01	0.4	1.63%	13.92	0.6
Heartland Fincl	HTLF	18.9	$312	1.03	2.1	10.01%	10.2	1.1
Home Bancshares	HOMB	28.51	$805	0.6	1.4	24.75%	12.68	1.7

Zacks # 1 Rank (Strong Buy) Local Banks

Company	Ticker	Stock Price	Mkt Cap (mm)	Beta	Div Yield %	P/E 2012E	P/E 2013E	Price/ Book
Bank Of Hawaii	BOH	$47.15	$2,168	0.8	3.8	13.5	13.5	2.2
Bbcn Bancorp	BBCN	$10.95	$854	1.8	0	11.4	10.4	1.2
Bok Finl Corp	BOKF	$56.85	$3,969	0.8	2.7	12.7	12.5	1.4
Cascade Bancorp	CACB	$5.18	$245	1.7	0	34.5	5.2	1.8
Centerstate Bnk	CSFL	$7.28	$219	0.4	0.6	31.9	19	0.8
Citizens Bkng	CRBC	$16.58	$664	2.2	0	10.1	12.4	0.9
Commerce Bancsh	CBSH	$39.02	$3,474	0.6	2.4	13.4	13	1.6
Commun Trust Bc	CTBI	$33.08	$514	0.7	3.8	12.3	11.8	1.4
Crescent Finl	CRFN	$5.39	$153	1.3	0	134.8	539	1.3
First Bus Finl	FBIZ	$22.85	$59	0	1.2	6.8	6.2	0.9
First Comm Bcsh	FCBC	$12.66	$226	1.2	3.5	10.7	9.9	0.8
First Commty Cp	FCCO	$8.00	$26	0.8	2	10.8	9.1	0.7
Firstmerit Corp	FMER	$16.07	$1,755	0.9	4	13.5	12.1	1.1
German Amer Bcp	GABC	$18.43	$232	0.6	3	10.8	10.5	1.4
Glacier Bancorp	GBCI	$14.56	$1,047	1	3.6	15	13.1	1.2
Guaranty Bancrp	GBNK	$1.83	$185	1.1	0	15.9	15.9	1.1
Heritage Commrc	HTBK	$6.14	$161	1.8	0	23.3	17.6	1.2
Heritage Fin Gp	HBOS	$12.23	$107	0.6	1.3	18.3	12.4	0.9

In evaluating the Zacks Industry Ranks, you want to see two things: a good overall score (low, meaning more Zacks #1 and #2 Rank stocks than #4 or #5 Rank stocks) and some improvement the relative position from the prior week. It is also helpful to understand exactly what the Zacks Industry Rank is.

The Zacks Industry Rank is the un-weighted average of the individual Zacks ranks of the firms in that industry. It does not matter if the stock is the 800-pound gorilla that dominates the industry or some very small niche player in the space -- they have the same influence on the Industry Rank.

Shifting into Overdrive - Zacks Industry Rank Analysis

John Blank — Sun, 20 May 2012 08:09:01 GMT

Money-Making Machines - Zacks Industry Rank Analysis

Dirk van Dijk — Wed, 04 Apr 2012 05:30:01 GMT

Industry Rank Analysis 4-4-12

The U.S. economy is continuing to recover, and one of the sectors which has been the real engine of that growth is business investment in equipment and software. While such investment in the fourth quarter accounted for less than 7.6% of the overall economy, it accounted for 18.3% of the overall growth in the fourth quarter, and that was down from an astounding 62.2% in the third quarter and 33.8% of the growth in the second quarter.

Today I am focusing on the equipment side of that, and more specifically investments in machinery. The strong macro performance of the sector is showing in upward estimate revisions and positive earnings surprises, and those in turn at reflected in the Zacks Rank.

Zacks Industry Classifications

The Zacks industry classifications are very fine, with 258 different industries tracked. It is not particularly noteworthy if a single small industry shows up doing well; a single firm with good news can propel a one or two firm industry to the top (or bottom) of the charts.

It is interesting when you see a cluster of similar industries at the top of the list. The same holds true for the bottom of the list. The definition of size that matters here is not the total sales or market capitalization but the number of companies in the “industry.”

4 Machinery Groups Working Well

There are four Machinery “industries” that are showing up very well on the Zacks Rank. The strongest three of which are about median sized “industries,” with seven or eight firms in them. The “weakest” of the four is by far the largest, General Industrial Machinery, with 37 firms in it. It still shows up pretty well, coming in 44th place, a drop of five slots from last week. Its average Zacks Rank is 2.57, up slightly from 2.54 last week.

The strongest of the Groups is Machine Tools, with eight firms in it. It is currently the fifth strongest “industry” with an average Zacks Rank of 1.88, down from 2.00 last week. In Between we have the Construction and Mining Machinery “industry” in 19th place (up one from last week, and an average Zacks Rank of 2.38, unchanged from last week), and The Farm Machinery “industry,” a seven member group in 23rd place, slipping one spot from last week on an unchanged average of 2.43.

If the Zacks Ranks were distributed randomly, one would expect that only 5% of the members of the firms would earn the coveted Zacks #1 Rank (Strong Buy). Instead, of the total of 13 firms in these four groups, 21.7%, have earned that distinction. If it were random, only 15% would hold Zacks #2 Ranks (Buy) but actually 10 (16.7%) hold it.

Go Big or Go Small

There is a huge range of market capitalizations from which to choose from on these lists, from very large down to micro cap. While the growth rate from this year to next is not shown directly, you can get a sense of it from looking at the change in the P/E ratio from this year to next. Most of these firms are looking at very respectable growth rates, at least in the short term.

Of course, Machinery is a quintessentially cyclical part of the market, so it is NOT a good idea to extrapolate those growth rates too far into the future. It does, however, indicate that we are in the middle of a cyclical upswing. Valuations on these stocks -- particularly if you are willing to look out to FY2 (mostly 2013) earnings -- are quite reasonable. While most of the smaller cap names do not pay dividends, some of the large and mid-cap cap names do provide a nice payout.

Number 1 Ranked Firms

Company	Ticker	Market Cap ($ mil)	P/E Using Curr FY Est	P/E Using Next FY Est	"%Ch Curr Fiscal Yr Est - 4 wks"	"%Ch Next Fiscal Yr Est - 4 wks"	"Current Price"	Div Yield
Caterpillar Inc	CAT	$58,661	12.86	9.76	1.69%	3.36%	$90.99	2.02%
Lincoln Electrc	LECO	$2,639	12.95	10.94	12.37%	9.97%	$31.28	1.98%
Robbins & Myers	RBN	$1,987	18.6	14.36	0.00%	0.00%	$43.48	0.41%
Middleby Corp	MIDD	$1,434	16.58	13.95	0.00%	0.00%	$76.50	0.00%
Actuant Corp	ATU	$1,377	12.24	10.26	0.00%	0.00%	$20.06	0.20%
Barnes Grp	B	$1,191	15.37	12.61	5.29%	3.58%	$21.87	1.46%
Lindsay Corp	LNN	$692	18.55	17.45	0.00%	0.00%	$55.08	0.62%
Sun Hydraulics	SNHY	$647	17.2	14.7	0.08%	0.06%	$25.25	1.43%
H&E Equip Svcs	HEES	$355	N/A	12.32	-226.32%	0.00%	$10.14	0.00%
Dxp Enterprises	DXPE	$322	11.66	9.81	4.45%	4.10%	$22.81	0.00%
Hurco Cos Inc	HURC	$168	18.11	12.98	0.00%	0.00%	$26.08	0.00%
Flow Intl Corp	FLOW	$146	19.87	11.41	0.00%	0.00%	$3.08	0.00%
Manitex Int Inc	MNTX	$48	16.96	8.48	0.00%	0.00%	$4.24	0.00%

Number 2 Ranked Firms

Company	Ticker	Market Cap ($ mil)	P/E Using Curr FY Est	P/E Using Next FY Est	"%Ch Curr Fiscal Yr Est - 4 wks"	"%Ch Next Fiscal Yr Est - 4 wks"	"Current Price"	Div Yield
Deere & Co	DE	$30,496	11.34	9.68	0.33%	0.01%	$72.66	2.26%
Sandvik Ab	SDVKY	$16,062	11.88	9.47	-8.80%	-8.33%	$13.54	2.86%
Eaton Corp	ETN	$14,450	10.51	8.88	2.60%	2.62%	$42.35	3.21%
Kubota Corp Adr	KUB	$10,827	15.37	14.14	0.00%	0.00%	$42.57	1.74%
Metso Corp -Adr	MXCYY	$5,765	13.64	10.66	-5.20%	-4.74%	$38.53	4.86%
Idex Corp	IEX	$3,128	15.33	13.17	1.69%	2.14%	$37.74	1.80%
Nordson Corp	NDSN	$2,944	12.65	11.61	0.13%	0.13%	$43.13	0.97%
Terex Corp	TEX	$2,016	35.81	8.55	-29.53%	-8.27%	$18.39	0.00%
Astec Inds Inc	ASTE	$730	16.19	12.77	13.95%	8.92%	$32.22	0.00%
Graham Corp	GHM	$178	17.07	13.16	4.64%	1.99%	$17.98	0.44%

CATERPILLAR INC (CAT): Free Stock Analysis Report

DEERE & CO (DE): Free Stock Analysis Report

EATON CORP PLC (ETN): Free Stock Analysis Report

KUBOTA CORP ADR (KUB): Get Free Report

SANDVIK AB (SDVKY): Get Free Report

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