Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week’s analysis include AK Steel Holdings (NYSE: AKS), Alcoa (NYSE: AA), Freeport McMoRan (NYSE: FCX), Steel Dynamics (Nasdaq: STLD) and U.S. Steel (NYSE: X). To see the Zacks Industry Rank and the trend in earnings estimates revisions for all 208 industry groups, visit http://at.zacks.com/?id=3154.
Zacks Industry Rank Analysis is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.
The reaction to Alcoa’s (NYSE: AA) first-quarter surprise has been positive overall. Since the company reported quarterly profits of 79 cents per share, five of the 15 covering brokerage analysts have raised their full-year forecasts. The new consensus estimate calls for earnings of $3.26 per share, five cents above the average projection of a week ago. It should be noted that one analyst did lower his forecast, but he still remains comparatively bullish with a prediction of $3.30 per share.
Alcoa generated an 11% increase in sales, thanks to both good demand and higher prices. The company saw particular strength in the aerospace market, but also noted that Chinese demand remains very good. CEO Alain Belda described the world market as being “robust”.
Steel Dynamics (Nasdaq: STLD) followed Alcoa’s report with its own first-quarter surprise. STLD generated earnings of $1.01 per share, three cents above the upper end of its raised guidance and five cents above the consensus estimate. Revenues rose 30%, reflecting strength in the non-residential construction and industrial markets.
A decline in prices adversely impacted margins; the company saw its average consolidated selling price drop by $31 per ton on a sequential quarterly basis. The price decline may have been caused by higher inventory levels within the channel during the first-quarter a headwind that raised concern for the entire industry. STLD observed in late-March that inventory levels at steel service centers had declined, however – a bullish sign.
Two of the nine covering brokerage analysts raised their full-year forecasts on STLD following the release of the first-quarter results. The new consensus estimate calls for 2007 earnings to total $3.87 per share versus $3.84 a week ago and $3.76 two months ago.
AA is a Zacks #2 Rank (“buy”) stock and is classified in Mining-Non Ferrous. This group also contains four Zacks #1 Rank (“strong buy”) stocks, including Freeport McMoRan (NYSE: FCX). STLD is a Zacks #3 Rank (“hold”) stock and is classified in Steel-Producers. This group contains five Zacks #1 Rank stocks, including AK Steel Holdings (NYSE: AKS) and U.S. Steel (NYSE: X).
The interactive Zacks Industry Rank List allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. See the list at http://at.zacks.com/?id=3208.
(a)The Zacks Rank is assigned to companies with earnings estimates made available by brokerage analysts. The Zacks’ database contains earnings estimates for approximately 4400 companies.
About Zacks Industry Rank and the Zacks Rank
Zacks Industry Rank is calculated by averaging the Zacks Rank for all covered companies within a given industry. The Zacks Rank is assigned to approximately 4400 stocks and ranges from #1 (“Strong Buy”) to #5 (“Strong Sell”). Both the Zacks Industry Rank and the Zacks Rank are quantitative indicators designed to cover periods of 1-3 months.
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +31.8%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 143.6% annually (+4.8% vs. +11.8%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
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