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- NEW YORK, Aug 10 (Reuters) - Equity funds took in a net $380 million in the week ended Aug. 9, unchanged from the prior week, TrimTabs Investment Research estimated on Thursday.
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- Including ETF activity, Equity funds report net cash outflows totaling -$938 million in the week ended 8/16/06 with Domestic funds reporting net outflows of -$1.384 billion and Non-domestic funds reporting net inflows of $446 million;

2) Recent Research Articles - Actionable investment research and commentary, unedited, straight from the pros. (Click to read a post)

2A) (BRNC) - Earnings per share are forecasted to grow a robust 55% over the next 3-5 years, while the industry is projected to grow 38%:

2B) (SUN) - earnings expectations in seven out of the past nine quarters by an average margin of 19.8%:

2C) (BDX) - Stock Pick - beaten the Street's estimate for 13 consecutive quarters, including the most recent:

2D) (EXP) - management expects earnings $4.40 to $4.70 - at least 45% growth - (KOMG) - boosting manufacturing capacity and launching new products:

3) Viewing the Market: Financial analysts / journalists comment on the current stock market and future direction.

Dennis Slothower, editor of the On the Money-E newsletter, explains that the indicators are very mixed and risk is still threatening. Read this featured expert’s technical analysis and find out what he has to say about the OTC indexes. Slothower also touches on the fundamentals and the geopolitical picture in his market commentary.

MARKET COMMENTARY from August 16

The news that both the PPI and the CPI figures are dropping/moderating has sparked a massive short covering squeeze, especially in the OTC indexes. The Nasdaq 100 has jumped 5% in two days.

All this year the OTC indexes have lagged the rest of the market. They have led on the way the down. There have been a lot of people who have been short the OTC. And news that core inflation fell from 0.3 to 0.2 was viewed as confirmation that inflation is not a problem.

Dennis Slothower thinks those who have been short the OTC are now seeing why the Fed paused in August. Given the weakness in the economy, the reasoning is that the Fed may now come to rescue and start stimulating going forward to prevent the economy from falling into recession.

From a technical perspective, the bear trend in the OTC has not been altered by this two day rally. The OTC indexes are still trading below their monthly middle Bollinger Band lines, only now the middle BB line has become a major resistance level.

Only a monthly close above 1,583 for the Nasdaq 100 and 2,152 for the Nasdaq Composite would alter the long-term trend perspective for the OTC indexes.

Today, the Nasdaq 100 closed at 1,570 and the OTC Composite at 2,142. To break above the 200-day moving averages, the Nasdaq 100 would have to close above 1636 and the OTC Composite above 2,225.

Maybe the OTC will get above this long-term primary resistance or maybe it won’t, here in August, but until it does Slothower has to stay with the assumption that the OTC indexes are still in a bear phase until proven otherwise.

The Russell 2000 also needs to close above 712, in order to better its 200-day moving average.

Now, of course, we can gamble that a new bull market is resuming and that the mid-term election year low has already been established. That may be so, but Slothower suggests we wait for confirmation before making any assumptions, just yet.

Here’s what Slothower is looking at, technically. In the breadth studies he would like to see the OTC strong enough to turn the advance/decline line upward. That hasn’t happened yet. It is still inconclusive whether the OTC McClellan Summation Index is turning up or is turning down. There is no discernable trend yet in this indicator. It is chopping.

Today was the first day that the OTC New Highs actually exceeded New Lows, at 89 verses 76. The trend in the New Highs minus New Lows is still very much trending downward. This may change here soon, but it has to move above key resistance in order to “officially” change.

There is still a mixed picture in the momentum studies. The Dow-30 and S&P 500 are above their daily, weekly and monthly middle Bollinger Band lines. But not so for the OTC, which still face the middle Bollinger Band as resistance, rather than support.

Market leadership indicators still show the NYSE leading the OTC. The micro-cap mutual funds are still in a downtrend. But the OTC McClellan Volume Summation Index has turned positive for a couple of weeks. So, we’ll see if buying can broaden ahead of the weakest month in the year.

Among the oscillator indicators, the Fidelity Select Family Stochastic Oscillator is still negative at %K 4 and %D 6. This is grossly oversold but it could stay that way for a few more weeks, too. Until this turns positive it tells us that the average Fidelity Sector Fund is still under selling pressure.

Fundamentals are worsening. The rate of change in the growth of the money supply as measured by M2 is dropping again. The last couple of weeks M2 rate of change has dropped from 7.2% down to 4.7%. If this trend continues, it undercuts GDP growth in the third quarter, which doesn’t bode well at all for third quarter earnings.

The bottom line is that the indicators are very mixed and risk is still threatening.

Geopolitical concerns are not all that much better. We still don’t know if the Iranians will agree to the UN nuclear issues on August 22nd, or what kind of a reaction will follow in the aftermath of their decision.

Lastly, from a cyclical perspective, the summer months have been rough most years, but frequently do see a late summer rally, which tends to peak around the latter part of August.

Given the fact that the weekly stochastics for the indexes are quickly becoming overbought suggests to Slothower that September could still see another leg down develop for the stock market, with the official bottom developing around the first week or two of October.

So don’t place a lot of bets on this recent 2-day rally. It could unwind just as quickly as it wound up.

3B) Latin American Outlook is Positive
With Claudio Freitas, Aug 18, 2006

As interest rates and other issues affect U.S. investors, senior analyst Claudio Freitas, CFA, who covers various industries in Latin America, says the same issues are affecting companies within his coverage. We spoke with him to find out what he expects from the region going forward.
Were there any surprises -- positive or negative -- in Latin earnings reports this quarter?

In general, the results for Latin American stocks were positive. I am not surprised, since the economic environment remains positive in the region. Nevertheless, there were some surprises. Pao de Acucar (CBD) disappointed most of the analysts, including myself. Everyone thought that a retail giant would benefit from lower interest rates in Brazil; unfortunately this was not the case.

Elsewhere, COPEL (ELP), the electric utility posted great results, even better than the already expected positive results. I would say that most results came as expected in my coverage, with only a few exceptions.

What is the current climate like for investing in Latin stocks at this time -- good, bad or neutral?

It is improving. Just some weeks ago everyone was worried over higher interest rates in the U.S., Europe and even Japan. After the last FED FOMC meeting those fears are not that important anymore, thus there is room for some reasonable appreciation in the very short-term.

However, I am concerned that in the near future some investors will start to talk about the economic landing in the U.S. Will it be a perfect soft-landing? Difficult to say now, but I believe there will be some volatility in the not-too-distant future for Latin American stocks once more.

Would you advise investors to look to Latin America for valuation plays or growth? Perhaps both?

At this point, I would say that there are some interesting stocks trading at very attractive valuations that are also growth stocks. I am concerned over the possible volatility in the near future, so I must be careful to choose what stocks might be interesting.

I believe that for a Latin American stock to be really interesting it must have an attractive valuation coupled with a considerable short-term growth outlook. In my estimation, there are definitely some stocks like this out there at this time.

What are your top Buy and Sell recommendations at this time?

In Brazil, I like Net Servicos (NETC), a clear growth stock, with a huge short-term potential. Also interesting is VCP (VCP), a pulp and paper company that has been posting positive results and is trading at a very attractive valuation. COPEL (ELP) is also an interesting name, with a considerable long-term growth outlook and an attractive valuation. In Mexico, I like FEMSA (FMX), which has been posting great results and is undervalued if compared to other similar stocks.

I do not like Pao de Acucar (CBD), the Brazilian retailer. In fact, CBD has posted disappointing results during a benign economic environment.

Looking toward the end of 2006, what are you expecting from the markets in Latin America?

In the very short-term, I am concerned that the fear of higher interest rates in the U.S. could be replaced by the fear of the hard landing. I am not saying that there will be a hard landing, but at some point in the following two months the market could become concerned over this possibility, and volatility would increase at that point.

Nevertheless, I expect a positive year-end. After some time the volatility will be over and the market will be ready for a new rally. I still believe that the medium-term outlook for Latin America remains positive, and that the stocks are still highly attractive.

Claudio Freitas, CFA is a senior analyst covering various industries in Latin America for Zacks Equity research.

About Zacks Analyst Interviews
Zacks Equity Research employs 50 stock analysts who are experts in the industries they cover. In these articles you will discover our analyst's insights on key industries in the news along with their favorite stocks to buy and sell now.

CryptoLogic, Inc. (CRYP), a Zacks #1 Rank stock, beat the Street's earnings estimate in the past five quarters by an average margin of 15.4%. Earnings per share are expected to grow 20.0% over the next 3-5 years. Consensus estimates for this year and next are trending higher. The company is currently yielding 2.2% and has a return on equity of 31%, compared to 3% for the industry average.

Full Analysis

CryptoLogic, Inc. is a software developer in the Internet gaming industry. The company's complete online gaming lineup includes more than 150 casino table and slot games, player-to-player poker and multi-player bingo. CRYP also provides licensing, e-cash management and customer support services.

Over the past five quarters in which CRYP exceeded analysts' earnings expectations it did so by an average margin of 15.4%. Earnings per share grew 18.1% over the past five years are expected to grow by a greater magnitude going forward—20.0% over the next 3-5 years.

On Aug 3, CRYP beat the Street's estimate by a solid 25.5% when it reported second-quarter profits of $8.2 million, or 59 cents per share. Profits in the prior-year period came in at $4.8 million, or 33 cents per share. Revenues ballooned 52.8% to $30.4 million. President and CEO Lewis Rose stated, "CryptoLogic's new casino games went head-to-head with the World Cup and warm weather—and won. Our Q2 revenue and earnings were far ahead of expectations and surpassed our results in Q1 2006, which is typically a stronger quarter." During the quarter, the company launched 11 innovative new casino games.

For the first six months of the year, profits and revenues rose 65.6% and 42.5%, respectively, when compared to the first six months of 2005. The company increased revenues and grew profits for the past three years, most recently by 35.5% and 49.6%, respectively, in 2005.

Consensus estimates for this year jumped 10.5% over the past seven days. Profit forecasts for next year have risen 8.8% over the past week.

The Board of Directors declared a quarterly cash dividend of 12 cents per common share of stock on Aug 1. CRYP has a current dividend yield of 2.2%.

The company is currently trading at a discounted valuation of 11.2x trailing 12-month earnings and at 10.4x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 16.1x trailing 12-month earnings and at 15.4x its current fiscal-year estimated earnings. The company has a price-to-book ratio of 3.3, compared to 4.0 for the market. CRYP's level of profitability, as measured by its return on equity, absolutely obliterates the industry average. The company has a ROE of 31%, compared to 3% for the industry.

Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. This important indicator is updated daily on Zacks.com and is available to Zacks Premium subscribers. As such, it is prudent to check the site for the latest Zacks Rank on the stocks highlighted in this section. Simply click the link for the stock or enter the symbol in the ticker entry box in the upper left hand corner of the web site.

OUTLOOK

In Q1 revenue was $481 million, up 2% sequentially and below our estimate. Revenue was negatively affected by slower orders in Japan and weakness in the Storage & Servers business. Gross margin declined due to an unfavorable shift in product mix and a warranty reserve. Nevertheless, we see signs of accelerating demand in the Communications business. Also, we believe the current stock price offers an attractive entry point for investors. We continue to rate Xilinx a Buy and have set our price target to $30.

KEY POINTS In the June quarter, New Product revenue, comprising 39% of total revenue, grew 8% sequentially and 78% year over year. Xilinx expects growth in the Communications business to accelerate based on higher design activity in the wireless and metro and core access markets. There is substantial growth potential for programmable logic devices (PLDs), due to the long-term trend of PLDs replacing application-specific integrated circuit (ASIC) solutions. At the current stock price, we believe that the upside potential strongly outweighs the downside risk. We think the current stock price is an attractive entry point for the long-term investor.

OVERVIEW

Xilinx (XLNX) designs and manufactures a broad range of high-performance, high-density programmable logic devices (PLDs), such as field-programmable gate arrays and complex programmable logic devices. A programmable logic device is an integrated circuit that can be programmed in a laboratory to perform complex functions. These logic devices are used to direct signal traffic within a digital system. Equipment manufacturers across a wide range of industries employ PLDs in their devices.

We believe Xilinx is a play on the secular trend of PLDs replacing application-specific integrated circuits (ASICs). Engineers typically use ASICs for high volume but low-cost applications. The high cost of developing an ASIC can be spread out over the large number of relatively cheap units. On the other hand, PLDs do not have high development costs. The hallmark of a PLD is its flexibility. When designs have to be altered, they can be re-programmed and brought to market faster. Changes can be made even when the devices are in the field. However, the unit cost of each PLD is more than the unit cost of an additional ASIC. So in small to medium sized projects, PLDs are preferred. However, PLD vendors keep pushing down their unit costs. As a consequence, PLD vendors now argue that, from a total cost of ownership perspective, PLDs can compete with ASICs in larger applications because of the decreasing unit cost of PLDs, the shorter life-cycle, and the risk of fabricating custom chips.

The company markets its products through a direct sales force, an independent sales force, and distributors located in and outside of the United States. The focus of the direct sales force is to support all channels and to make sure the right solution has been chosen for a particular project. The independent sales force work with large original equipment manufacturers (OEMs). The distributors, among other things, address inventory and logistics issues with large OEMs.

The company s revenue stream has been moving away from its dependence on the communications space. The consumer and industrial markets today comprise 41% of total sales, compared to 36% in the same period a year ago. Customer concentration remains low; in fiscal 2006, the largest customer contributed to just 6% of total sales.

In Q1 revenue was $481 million, up 2% and below our estimate. The gross margin was 60.1%, compared to 62.3% in the prior quarter and 60.9% in the same period a year ago. The combination of lower revenue in base products and a greater than anticipated shift towards larger customers pushed down margins by 1 percentage point. Also, the gross margin was negatively affected a warranty reserve relating to a quality issue with Spartan-3.

Turns bookings for the quarter were 54%. While bookings for the months of April and May were healthy, order rates slowed in the month of June, especially in Japan. Japan was the weakest region this quarter. Almost of the top ten customers in Japan were down sequentially. The weakness was broad-based across end markets with particular weakness coming from communications, both wired and wireless, as well as test and measurement. These areas showed growth last quarter.

On the other hand, almost of the top ten customers in Asia-Pacific and Europe were up sequentially. And New products were up 8% sequentially. According to the company, the Virtex-4 revenue is up tenfold year over year. And Xilinx is the only PLD company currently shipping 65-nanometer FPGAs.

In Q1 free cash flow was $140 million during the quarter. Xilinx repurchased 4.7 million shares for $125 million. The company paid $31 million in dividends. Moreover, combined inventory decreased by 17 days to 117 days.

INDUSTRY OUTLOOK

We believe that the semiconductor industry is a positive story in the long-term. The Semiconductor Industry Association (SIA) forecasts that sales will grow by 6.3 percent in 2006 and by 14.2 percent to $259 billion in 2007. According to the SIA, projections of a less favorable supply-and-demand balance for memory products will be the major factor in dampening industry expansion next year. Over the longer term, the new forecast projects a compound annual growth rate of 11.8 percent through the forecast period.

We also believe there is a fundamental shift in the semiconductor industry from Corporate IT to Consumer Demand. According to the SIA, more than 50 percent of the $214 billion in semiconductors sold in 2004 have gone into products purchased by consumers, rather than corporate IT departments. This proportion will continue to grow in the years ahead as consumers all over the world are captivated by the richness and portability of digital media. Advances in computing, digital media processing, and wireless technology are enabling the industry to create lifestyle-changing devices and gadgets that we could only imagine a few years ago. The changing nature of customers will affect every aspect of the business, from product design to marketing to demand forecasting.

INDUSTRY POSITION

Xilinx is the leading provider of programmable logic devices. The company competes based on the following product characteristics: price, performance, power consumption, reliability, time-to-market, and ease of use. Given the rapid pace of technological change, the company must invest significant funds to keep its competitive edge. The major focus of the effort is the design of new ICs, the creation of software design tools, and cost reduction and performance improvements in products. Consequently, although the company is not dependent on any one patent or license, an important ingredient to success is the company s ability to protect its intellectual property.

The company is in an intensely competitive industry with players of all sizes and locations. Competitors include other PLD makers such as Altera and Lattice Semiconductor as well as numerous application specific integrated circuit (ASIC) manufacturers. However, given the trend of PLDs replacing ASICs in digital systems, the long-term growth prospects for the firm appear to be bright.

RECENT NEWS

On July 25, the company reported its financial results for Q1 of fiscal 2007. Xilinx posted sales of $481.4 million, up 2% sequentially and 19% year over year. Net income was $82.8 million, compared to $110.7 million in the prior quarter and $76.8 million in the same period a year ago. GAAP earnings per share was $0.24, compared to $0.32 in the prior quarter and $0.21 for the same quarter of the previous fiscal year.

In terms of geography, sales in North America, comprising 39% of total sales, was down 1% sequentially and up 15% year over year. European sales, representing 24% of total sales, increased 10% sequentially and 42% year over year. Sales in Japan, making up 11% of total sales, fell 18% sequentially and 7% year over year. Sales in Asia Pacific/ROW, representing 26% of total sales, increased 12% sequentially and 21% year over year.

In terms of end markets, Communications sales, comprising 49% of total sales, increased 3% sequentially and 21% year over year. Storage & Servers, representing 10% of total sales, was down 3% sequentially and down 13% year over year. Consumer & Automotive, making up 15% of total sales, moved up 2% sequentially and 31% year over year. Industrial & Other, representing 26% of total revenue, grew 1% sequentially and 43% year over year.

In terms of products, New revenue, comprising 39% of total revenue, grew 8% sequentially and 78% year over year. Mainstream revenue, representing 43% of total revenue, increased 1% sequentially and fell 2% year over year. Base products, making up 12% of total revenue, declined 12% sequentially and 8% year over year. Support, comprising 6% of total revenue, increased 1% sequentially and 7% year over year.

Turning to the balance sheet, cash and long term investments increased by $18 million to about $1.62 billion. Days sales outstanding decreased by 8 days to 29 days. Combined inventory at Xilinx and distribution fell by 17 days to 117 days in the quarter. Turns bookings for the quarter were 54%. For the September quarter, Xilinx expects revenue to be flat to down 5% sequentially. The gross margin should be between 61% 62%, including stock-based compensation charges. R&D and SG&A expenses should increase by 2% sequentially. Operating expenses will include $22 million in stock-based compensation charges. Other income is expected to be $20 million, and the tax rate should be 24%, plus or minus one percentage point. Fully diluted share count should decline to approximately 345 million shares.

On June 23, Xilinx announced that the U.S. Securities and Exchange Commission (SEC) is conducting an informal inquiry into the Company's practices, procedures and disclosures regarding its stock option grants. Xilinx is cooperating with the SEC in this matter.

VALUATION

Xilinx is trading at 19.4 times our fiscal 2007 earnings estimate, which is near the median P/E multiple for the industry. We think the current share price is at an attractive entry point for long-term investors. We believe the company s growth will reaccelerate given the competitive advantages of 90nm PLDs and its entrance into fast-growing markets. However, we have adjusted our target price to $30 to reflect greater market and regulatory uncertainty. This is derived by applying a target P/E multiple of 26.3x to our fiscal year 2007 EPS estimate.

RISKS

The company has high exposure to the communications market, and could be adversely affected by a downturn in that industry.

The semiconductor industry is characterized by rapid technological change and therefore the company must innovate in order to remain competitive.

Competitive advantages vis-à-vis Altera lessen.

A slowdown in the economy or a prolonged hesitancy by companies to invest in their technology infrastructure would undermine our investment thesis.

Gregory Spear, editor of The Spear Report newsletter, discusses the recent terrorist plot that was foiled and the Federal Open Markets Committee (FOMC) pause. Learn about one company’s advanced products that can help in the fight against terrorism. Afterward, take a sneak peek into this featured expert’s Consensus Buy List portfolio.

Detail from August 11

The news on Thursday morning (8/10) that British authorities thwarted a terrorist plan to blow up as many as ten U.S.-based jumbo jets in mid-flight using liquid explosives smuggled in carry-on luggage is a stark reminder that many in the world hold a rather dim view of U.S. foreign policy in the Middle East, and are willing to take extreme measures to voice those objections. The plot apparently targeted American, Continental and United flights from Britain. As a consequence, liquids and lotions are being banned from U.S. flights and the national terror alert level has been raised to Red.

The good news, supposedly, is that since the London bombing in July 2005, which resulted in a sharp intraday reversal and a multi-week rally, equity markets have been immune to terrorism news. On Thursday, Wall Street celebrated its resilience once again but the impetus behind the rally was half-hearted. The market remains profoundly uncertain and is exhibiting sudden shifts in direction that correspond with that state of confusion. The TSR Timing Model suggests a 25% exposure level. That seems about right.

Scanning not Banning

The latest terrorist plot was foiled, but the sad part is that such plots are very likely to succeed one day, yet we have the technology to stop most, if not all of them. Companies like American Science and Engineering (ASEI) have advanced products that will do the job, but they have to struggle for business because most nations are unwilling to upgrade outdated scanning equipment. Instead, we spend the money on personnel who pester us to untie our shoes, take off our belts and pat us down in a false show of conscientiousness that can be easily foiled by anyone who cares to.

Some advanced equipment has been installed in Europe, and of course, in Israel. In Manchester, England, for example, new in-line systems enable screening of luggage eight times faster than in the average U.S. airport where bags are handled manually. Paradoxically, the Transportation Security Administration (TSA) is the chief obstacle to equipment upgrades in America. In the 2004 Intelligence Reform and Terrorism Prevention Act, Congress mandated the TSA to get better baggage screening technology into our airports, and all that the TSA has done is set up a committee, which has produced nothing of practical value.

Instead, we get reactive edicts that ban the weapons-du-jour, which will now include just about everything, but we lack the technology to enforce the code in an efficient manner. Moreover, the latest ban on liquids will not stop the threat if manual searches remain the only verification method. Clothing can easily be constructed to hide such materials, which will not show up on the conventional metal scanners we walk through. If there is any lasting benefit from the massive media coverage of the London incident, it should be that a new level of high-tech inspection will now be demanded, using the type of equipment that sees through clothing and can identify the presence of all types of contraband, including dangerous organic compounds. American Science and Engineering’s SmartCheck system is just such a device.

The Fed Anticlimax

After 17 consecutive steps up the rate ladder, the Federal Open Markets Committee (FOMC) paused on Tuesday. This good news event was widely anticipated and thus Wall Street took it as an opportunity for selling, rather than buying. Chairman Bernanke can’t keep a secret. He is far more transparent than his predecessor, which spreads the natural volatility of important Fed announcements over a period of weeks or even months, diminishing its final impact. The market had already reacted to the possibility of this news twice in June and twice in July, which resulted in a 5% rally for the S&P 500 well before the August 8th meeting. Unfortunately, the Dow Transportation Index, the former bulwark of the bulls, is reacting poorly of late, which is suggestive of the typical rotation from cyclicals to staples that occurs near the top of the business cycle. Gregory Spear and his team continue to recommend stocks with below-market multiples, exposure to emerging market economies and generous dividends as they feel these attributes will provide a margin of safety should the market trend downward.A Sampling of the Consensus Buy List

Timken Company’s (TKR) activities are divided into two principal segments. The first is anti-friction bearings and the other is steel. Timken is a leading international manufacturer of highly engineered bearings, alloy and specialty steels and components, as well as related products and services. The company also produces custom-made steel products including precision steel components for automotive and industrial customers.

6B) American Financial Group, Inc. (AFG)

American Financial Group, Inc. (AFG), which was first featured in mid March, continues to beat analysts' earnings expectations. The company topped the Street's estimate in four straight quarters and in 11 out of the past 13. AFG recently upped its 2006 earnings guidance. This Zacks #1 Rank stock has a price-to-book ratio of only 1.5, compared to 5.0 for the market.

Full Analysis

American Financial Group, Inc., through its subsidiaries, is engaged primarily in property and casualty insurance, focusing on specialized commercial products for businesses, and in the sale of annuities and various forms of supplemental insurance.

When AFG was first introduced as a Value pick in mid March, it proudly held the status of a Zacks #1 Rank stock. In order to wear this crown, a company must post earnings that are exceeding analysts' expectations while receiving upward revisions to its earnings estimates. Five months later, investors will notice not much has changed, as it remains a Zacks #1 Rank stock.

AFG topped the Street's earnings estimate in four straight quarters and in 11 out of the past 13. Over the past four quarters, the company surprised to the upside by an average margin of 15.1%.

On Aug 1, AFG posted second-quarter profits of $1.16 per share, surpassing analysts' estimates by 8.4% and topping earnings in the prior-year period by 34.9%. Revenues came in at $995 million versus $984 million in the second quarter of 2005.

AFG's Co-Chief Executive Officers Craig Lindner and Carl Lindner III jointly stated,"We are making excellent progress toward meeting the company's objectives for 2006. Based on our results through the 2006 second quarter and the trends in our business, we are increasing our 2006 core earnings guidance to between $4.35 and $4.65 per share."

Consensus estimates have been on the rise for 2006 as well as 2007. Profit forecasts for this year increased 7.2% over the past 30 days. Analysts upped their estimates by 4.5% for 2007 over the same period of time. Earnings per share are projected to grow 10% over the next 3-5 years.

AFG is currently trading at a valuation of 10.8x trailing 12-month earnings and at 9.9x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 16.4x trailing 12-month earnings and at 15.8x its current fiscal-year estimated earnings.

The company has a price-to-book ratio of only 1.5, compared to 5.0 for the market. Its return on equity betters that of the industry average -- 14% compared to 11%.

Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. This important indicator is updated daily on Zacks.com and is available to Zacks Premium subscribers. As such, it is prudent to check the site for the latest Zacks Rank on the stocks highlighted in this section. Simply click the link for the stock or enter the symbol in the ticker entry box in the upper left hand corner of the web site.

Content Courtesy: Zacks Investment Research

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