(ARG) - sales momentum continues to be very strong

Airgas, Inc. (ARG) has met or exceeded analysts' expectations in six of the past seven quarters, topping the Street by 5.1% most recently. Earnings per share grew an impressive 24.8% over the past five years. The company's sales momentum continues to be very strong. Recent acquisitions should also help ARG going forward. Full Analysis Airgas, Inc., through its subsidiaries, is the largest U.S. distributor of industrial, medical and specialty gases and related hardgoods, such as welding supplies. The company is also the third-largest U.S. distributor of safety products, the largest U.S. producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast and a leading distributor of process chemicals, refrigerants and ammonia products. ARG has topped the consensus earnings estimate in three consecutive quarters by an average margin of 5.4%. The company has met or exceeded analysts' expectations in six of the past seven quarters. Earnings per share grew an impressive 24.8% over the past five years and are forecasted to grow 13.4% over the next 3-5 years. Third-quarter fiscal 2006 earnings per share at ARG amounted to 41 cents, beating the Street by two cents and topping profits in the prior year by 32.3%. Revenues increased 16.9% to $702.4 million, while total same store sales jumped 12%. ARG increased revenues for the past five years and grew profits for the past three. The company succeeded in expanding gross margins for nine years running. For the nine months ended Dec 31, 2005, ARG produced net earnings of $90.1 million, compared to $67.9 million in the prior period. Net sales were $2.1 billion, versus $1.7 billion for the first nine months of fiscal 2005. Based on the company's revenue and earnings growth momentum, ARG expects profits for the fourth quarter of fiscal 2006 to be between 41 cents and 43 cents per share. A number of analysts upped their earnings estimates for both fiscal 2006 and fiscal 2007. Eight analysts submitted positive revisions for this fiscal year, while seven have done so for next year. Consensus earnings estimates stand at $1.59 and $1.86, respectively, for the next two fiscal years. ARG has been somewhat active in the acquisitions arena. On Feb 1, 2006, the company announced that it acquired the assets and operations of West Point Supply Co., Inc. and its related companies. West Point recorded $4 million in sales last year. On Mar 14, 2006, ARG expanded in the Midwest by agreeing to acquire the assets and operations of Airtec, Inc., an industrial gas and welding supply distributor with six locations in Wisconsin and one in Minneapolis, MN. Airtec generated around $13 million in revenues in 2005. ARG has a return on equity of 14%, slightly below the industry average of 16%. On Jan 31, 2006, the company's Board of Directors declared a regular quarterly cash dividend of six cents per share. ARG has a current dividend yield of 0.61%. ARG is a Zacks #2 Rank (Buy) stock. Zacks #2 Rank stocks have generated an average annual return of 21.6% since 1988. Because the Zacks Rank has a http://www.zacks.com/help/zrankguide.php?p=13 >market cap bias, Growth & Income investors may find a greater number of large-cap stocks by considering both Zacks #1 Rank (Strong Buy) and Zacks #2 Rank (Buy) stocks in their selection criteria. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(ZMH) - upgraded to Buy

Target $79 on Zimmer Posted Thu Mar 30, 03:14 pm ET by Greg Aurand, CFA We have upgraded our rating to Buy on Zimmer Holdings (ZMH). Comparisons ease in the second half of the year and, combined with new product flow (including the Q106 launch of Trilogy ceramic/ceramic hip) and a replacement for OrthoPat, top-line growth in the second half of 2006 should be double-digit. At the group average 1.3x P/E/G on the company's expected average 18% growth outlook, our ZMH target is $79.00, or roughly 23x our 2006 EPS estimate. The completed acquisition of Centerpulse AG has strengthened ZMH's position in the global orthopedic industry. The transaction created the number one pure-play orthopedics company in the world. It combines Centerpulse's leadership in European orthopedics and platforms in spine and dental, with ZMH's leading positions in the U.S. and Japan in reconstructive products and MIS (minimally invasive surgery) procedures and technologies. Zimmer's current valuation more than offsets market concerns, in our opinion. At the time of our upgrade on March 28, 2006, ZMH traded at 19x 2006 EPS compared to the S&P 16x 2006 multiple, a 19% premium. This premium is well below the company's 50-60% historical premium. Despite the slower top-line, driven by fewer price increases, we feel a substantial premium continues to be warranted, given solid and superior long-term EPS growth characteristics vs. the market growth outlook. The new product flow and easier comparisons in the 2H06 should improve revenue growth. Courtesy: Zacks.com Analyst Blog

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(AGN) - price target is $115 based on modest appreciation throughout the year

Earnings Steady at AGN Posted Thu Mar 30, 04:34 pm ET by Jason Napodano, CFA Allergan, Inc. (AGN) is a global specialty pharmaceutical company that develops and commercializes innovative products for the eye care, neuromodulator, skin care and other specialty markets. The company operates three primary business segments: Skin Care, Eye Care and Botox. We are optimistic that strong trends in Botox and the rest of the business will continue to keep Allergan delivering solid earnings growth over the next several years. Sales of Botox reached $227.3 million, up 12% year-over-year. The upside was led by strong sales in both therapeutic and cosmetic indications. Allergan received approval for Botox use in axillary hyperhidrosis (severe underarm sweating) in 2004. Additional potential uses for Botox are in headache/migraine control (phase III), neurogenic overactive bladder (phase III), idiopathic overactive bladder (phase II), and post herpetic neuralgia (phase II). The phase III headache study initiated in the first quarter of 2005 could be a multi-hundred-million-dollar opportunity for Botox. Phase III studies in overactive bladder should commence shortly. In 2006, we expect an increase in research and development spending as Allergan attempts to bring new Botox indications to market. The acquisition of Inamed should accelerate Allergan's revenue growth and is expected to be accretive to Allergan's cash EPS from 2007 onwards. Our model shows Inamed products contributing about $377 million to total revenues in 2006. However, the stock currently trades at 30x our 2006 estimate of $3.65, and we think that represents fair value. Our price target is $115 based on modest appreciation throughout the year. Courtesy: Zacks Equity Research Analyst Blog

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Fast-Growing Chinese Internet Still Has Room

Fast-Growing Chinese Internet Still Has Room With Paul Cheung Mar 31, 2006 China, while still the fastest-growing economy on the globe, is proving to have unique characteristics that are likely to continue bedeviling investors. We spoke with senior analyst Paul Cheung, CFA about where in China investors should be focused right now. What industries are growing the fastest in China at the present time? The Internet, financial and resource industries are growing the fastest in China at the present time. While China has the second largest number of Internet users in the world – second only to the U.S. – the penetration rate is still less than 10%. The government wants this sector to grow, but is also worried about it since it could undermine their political control, thus the recent flap with Yahoo! (YHOO) where the government is attempting to censor certain topics on the net. The financial system is still quite underdeveloped, and getting loans from the banking system is often more related to political connections than to the soundness of the business plan. A more modern financial sector would lead to better allocation of capital, and thus more sustainable long-term growth. The Chinese government and foreign strategic investors have invested billions of dollars to improve China's financial system in the past two years. As a result, the performance of China's finances have improved greatly. Furthermore, China's demand for raw materials – as it attempts to bring hundreds of millions from abject poverty to a reasonable standard of living – appears to be almost insatiable. Is the government taking steps to slow economic growth? How do you forecast the next six months will develop? The Chinese government won't take steps to slow overall economic growth, but it will take measures to slow the growth of some industries including steel, cement and real estate. I forecast the Chinese economy will continue to grow at about 9% over the next six months. In part, there is a feeling that these industries have been built up too fast in the recent past, due somewhat to the political connections with local governments. The overcapacity could lead to these industries facing severe pricing pressures or the need to export their production, which will just lead to more political problems on the trade imbalance front. Are any sectors in China slowing down without help of the government? Agricultural-related sectors in China will slow down without help from the government. Agricultural-related businesses will naturally slow because the agricultural industry is underdeveloped, and the income of rural people is far below that of urban people in China. At this time, the Chinese government is taking measures to stimulate the development of rural economy through tax subsidies and loans. Assuming China is still a good place for investors to put their money, what issues should investors be paying close attention to? Investors should pay attention to the Chinese government's promotion measures and regulations to certain industries. The Chinese government is expected to promote industries including resource conservation, environmental protection and industrial infrastructure upgrading. The means with which it plans to do this are through shortening the approval procedure, tax subsidies and loans. Industries that the government would regulate are those that waste resources and certain underdeveloped technology initiatives, such as 3G issues that may affect companies like China Unicom (CHU) and China Telecom (CHA). It would do this by divesting from businesses in areas such as this and closing government-controlled plants and offices. As a result, it would be best to avoid those industries such as steel where the government is trying to discourage investment and to focus on those where the government is trying to increase investment such as oil and other natural resources. What is your top Buy recommendation at this time, and why? CNOOC (CEO) is my top Buy recommendation because of the high price of crude oil, the high efficiency of the company and the Chinese government's support. CNOOC is one of the three largest state-owned petroleum and petrochemical companies in China. The company is China's largest producer of offshore crude oil and natural gas and one of the largest independent oil and gas exploration and production companies in the world. CNOOC is the only company permitted to conduct exploration and production activities with international oil and gas companies off China's shore. The company is also one of the largest offshore crude producers in Indonesia. As of year-end 2004, CNOOC owned net proved reserves of approximately 2.2 billion barrels-of-oil equivalent and its annual average production was 382,513 barrels-of-oil equivalent per day. Paul Cheung, CFA is a Zacks senior analyst covering a variety of companies in the People's Republic of China. 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 current insights on key industries in the news along with their favorite stocks to buy and sell now. Learn More about Zacks Equity Research

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(BRG) - fourth quarter EPS of $1.14, 777% above last year

BG Group PLC (BRG) is a solid company with strong market action. Background BG Group PLC works across the spectrum of the gas chain. The Group operates four business segments: Exploration & Production, Liquefied Natural Gas, Transmission & Distribution, and Power. Full Analysis Natural Gas is a red hot sector right now due to high energy prices, and BG Group is a star performer in the space. On Feb 9, 2006, BRG released fourth quarter EPS of $1.14, 777% above the same quarter last year. More importantly the fourth quarter results were a 3.6% surprise above the consensus estimate from analysts. Sales showed a 75% gain over the same period a year earlier at $3,489 million. Income was up 65% at $810 million. Technical Review BRG is an example of why Momentum trading works so well. This is a stock that most investors shy away from, thinking that the stock has gained too much already. And indeed, with the stock already up almost 29% for the year to date, some caution must be advised. However, BRG has really been in an uptrend since mid 2002 and the stock has outperformed the general market in three of the last four years. It was up 22.5% in 2003, the only year in the last four that BRG didn't beat the general market. With a strong stock such as BRG, it's difficult to pick a buy point, since there have been so few setbacks in the last four years. Instead, the Momentum investor needs to focus on confirmation that the stock is still in demand. Importantly, BRG is a Zacks #1 rank stock, assurance that the company is doing well on the fundamental side. It set a new 52-week high on twice normal trading volume yesterday, proof that the stock has not fully discounted its current favorable fundamentals. With a strong company and strong market action, it can clearly be said that you are buying an improving company at a time that improvement is being recognized by the market at a whole. Now that's Momentum investing. Content Courtesy: Zacks Investment Research #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(TFSM) - PEG ratio of 0.63 - exceeded earnings estimates in three out of four quarters

24/7 Real Media, Inc. (TFSM) exceeded earnings estimates in three out of the past four quarters. Five analysts raised their numbers for 2006. Over the past 30 days, estimates have increased 6.3% to 34 cents per share. The stock is cheap despite recently hitting new 52-week highs. TFSM is trading at about 22x next year's estimates, well below the long-term growth rate of 35%, giving the stock a PEG ratio of 0.63. Full Analysis 24/7 Real Media, Inc. (TFSM) provides technology-driven products and services to advertisers, Web publishers, and e-commerce merchants worldwide. The company provides these services through a comprehensive suite of media, search, and technology products in order to plan, execute, measure, and analyze their marketing programs. These products, coupled with its proprietary analytics technology - Open AdSystem platform of serving, targeting, tracking, and analytics technologies, targets and delivers audiences for publishers and marketers. 24/7 Real Media is a niche player in interactive marketing and technology. The company survived the dot-com downturn thanks to a well-executed strategic plan, and even emerged in a stronger position. The company has restructured its operations by increasing its focus on core businesses, including web representation, advertisement serving, analytics, and search marketing services, while divesting non-core businesses. Online advertising continues to gain acceptance among traditional advertisers as a valuable marketing tool. As the Internet takes users away from traditional media, such as television, newspaper and magazines; advertisers will increase spending on online advertising, which currently only accounts for approximately 5% of advertising budgets. Growth in broadband connections is also favoring the Internet and gives advertisers the ability to deliver more content-rich advertisements, thus making them more useful and creating increased awareness. TFSM exceeded earnings estimates in three out of the past four quarters. Five analysts raised their numbers for 2006. Over the past 30 days, estimates have increased 6.3% to 34 cents per share. The stock is cheap despite recently hitting new 52-week highs. TFSM is trading at about 21x next year's estimates, well below the long-term growth rate of 35%, giving the stock a PEG ratio of 0.60. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(AAPL) - possible rotation into technology

Gregory Spear and his team, from The Spear Report Professional Edition newsletter, explain that until yesterday, the Nasdaq was a drag on the market and was responsible for much of the choppy trading environment. Learn these experts' outlook on the Nasdaq going forward and discover what they have to say about a possible rotation into technology. Also, read their analysis of two giants from the tech space. COMMENTARY The market experienced a curiously strong rally on Wednesday as the Nasdaq came to life. Until yesterday, the Nasdaq was a drag on the market and was responsible for much of the choppy trading environment. Now, its technical condition has improved and it sits on the verge of at least a 100 point move. Such a breakout, however, will require the cooperation of the semiconductors. Meanwhile, volume was rather light for the S&P tracking stock and the Dow did not make much progress. In other words, we may be about to get a rotation to tech, which is what Gregory Spear and his team have been anticipating for a while now. The main catalyst for such a rotation would be Apple (AAPL). Like Google (GOOG), Apple's stock has been a major underperformer in the last three months after guiding earnings significantly lower. Yesterday, an analyst at Piper Jaffray began talking up the possibility that Apple will debut a wireless phone and phone service late this year or early next year. Apple would lease excess network capacity from a major wireless service provider and resell minutes to its iPhone customers, making Apple a mobile virtual network operator (MVNO). Add this abbreviation to your list of wireless communication jargon from yesterday. While margins on the resale of minutes would be slim, the iPhone would provide a robust platform from which to launch a fee-based multimedia content delivery operation and create an addictive, converged, portable device. This isn't completely new news, but when analyst talk, either positive or negative, comes at a time when a stock is at a technically sensitive area, a fractal bifurcation can take place--which is fancy language for a sharp reversal. Such bifurcations tend to run for a significant amount of time, i.e. they are tradable. Apple and Google were the twin drivers of the Nasdaq rally in the last 18 months and each has been in a multi-month correction of approximately 30% after running 300%-400% over that time period. With the two generals in the brig, as it were, the Nasdaq troops have been in disarray, milling about despondently for three months. Google, however, has been bouncing in the last week after being added to the S&P 500. Last night the company announced a $2 billion follow-on offering and that shaved about 3% off the price in after hours trading, but its uptrend remains intact. With Apple now starting to bounce as well, it is now possible that the Nasdaq will manage to reorganize itself and march higher. This article highlights the commentary of Gregory Spear for the Zacks.com audience. Gregory Spear provides insightful analysis, market commentary, and favorite recommendations on a timely basis in "The Spear Report Professional Edition" newsletter. Try it free for 30 days and see if you can improve your investment performance. Learn more about "The Spear Report Professional Edition" and 30-Day Free Trial. And get immediate access to current issues and special reports. Click here now. Here's How You Can Profit from the Pros Find out what other leading experts are saying about the market. And what stocks they are recommending. For free. Just sign up for our free email newsletter, Profit from the Pros, where we'll give you the commentary, advice, and insight from those rare few experts who consistently beat the market year in, year out. Click here now.

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(CSX) - Earnings per share are forecasted to grow 15.6% over the next 3-5 years

CSX Corporation (CSX) has met or topped the consensus earnings estimate in eight of the past nine quarters, most recently by 14.4%. The company has a five-year average dividend yield of 1.5% and a return on equity of 10%. Earnings per share are forecasted to grow 15.6% over the next 3-5 years. Full Analysis CSX Corporation, through its subsidiaries, provides rail, intermodal, and rail-to-truck transload services. The company's principal operating company, CSX Transportation Inc., operates the largest railroad in the eastern United States CSX has met or topped the consensus earnings estimate in eight of the past nine quarters. Earnings per share grew 20.3% over the past five years and are forecasted to grow 15.6% over the next 3-5 years. On Jan 24, 2006, CSX beat the Street's fourth-quarter earnings estimate by 14.4%. The company posted earnings per share of $1.03, while analysts projected 90 cents. CSX surpassed its profits from the prior year by an impressive 45.1%, led by stronger surface transportation operating income, higher real estate sales and lower interest expense. Quarterly revenues reached $2.22 billion, up from $2.18 billion in the fourth quarter of 2004. For all of 2005, CSX's profits amounted to $1.15 billion, up from $339 million in 2004. Revenues jumped 7.5% to $8.6 billion from $8.0 billion in the prior year. Heading into 2006, the company points to its strong foundation, an economic environment that favors rail transportation and momentum behind its key strategies. Furthermore, CSX remains on schedule with its capacity expansion plans. The company has increased revenues and grown profits for the past two years. The North American railroad industry has experienced increased demand and revenues over the past two years. The increased need to haul imported goods, coal and other materials has fueled growth, along with an increase in prices. Improving revenues should enable railroads to make capacity investments going forward. On Feb 8, 2006, the Board of Directors at CSX approved a quarterly dividend of 13 cents per common share of stock. Strong cash flows from operating activities have led to a current dividend yield of 0.87%. CSX has a five-year average dividend yield of 1.5%. The company's return on equity is 10%. CSX is a Zacks #2 Rank (Buy) stock. Zacks #2 Rank stocks have generated an average annual return of 21.6% since 1988. Because the Zacks Rank has a http://www.zacks.com/help/zrankguide.php?p=13 >market cap bias, Growth & Income investors may find a greater number of large-cap stocks by considering both Zacks #1 Rank (Strong Buy) and Zacks #2 Rank (Buy) stocks in their selection criteria. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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Small-cap biotech firms that show the most promise

Find Biotechs Strong in Phase II Testing by Jason Napodano Mar 30, 2006 In our most recent interview with senior pharmaceuticals analyst Jason Napodano, CFA, we discussed the strong valuation plays that can be made in Big Pharma companies. Today, we wanted to look at some of the small-cap biotech firms that show the most promise. Which small-cap biotech stocks are most interesting to you at this time? I'd like to first just say that when it comes to biotech, I don't like to pinpoint just one or two stocks. For me, I take more of a basket approach, and, by the way, I'd advise investors to do the same when considering investing in this market. That said, one biotech company I really like right now is called ACADIA Pharmaceuticals (ACAD). This company has two phase II drugs with three indications. The first drug is called ACP-103, which is developed for psychosis associated with schizophrenia as well as psychosis associated with Parkinson's disease treatment. Parkinson's disease, as you probably know, affects motor functions that affects a person's ability to walk or move; it's what we call a neuromodulator disease. The treatment for Parkinson's is called dopamine replacement therapy, as dopamine is a neurological transport. But the problem with this treatment is that roughly 30% of patients who receive dopamine replacement therapy experience psychosis associated with excess dopamine. This leads to hallucinations, delusions, hearing voices, that sort of thing. So although getting Parkinson's disease is obviously bad, the treatment is also really bad for about a third of its patients. ACADIA is developing ACP-103 to both enhance treatment by way of helping improve motor functions and also reduce the psychosis. In effect, this drug is a Parkinson's disease treatment treatment. And because psychosis-related problems represent a large market, there is a very large opportunity for this drug here. Positive phase II data came out early this month, and I've even spoken to a company representative earlier this week. They're expecting to move to phase III trials later this year, and I am expecting good things there, as well. This same drug – ACP-103 – is also being tested for the treatment of schizophrenia that's not Parkinson's related. It essentially does the same thing: brings down and normalizes dopamine levels in the brain to reduce hallucinations and so forth. Another drug developed by the company – ACP-104 – is also being tested in the treatment of psychotic episodes associated with schizophrenia. This is an enormous market. At $20 billion in sales, anti-psychotics represent one of the largest markets in the pharmaceutical industry. If ACP-104 is successful as a treatment for psychosis, or if ACP-103 is successful as an add-on therapy, then ACADIA's sales numbers will be huge! This is what's exciting about ACADIA – it's only got a market cap of around $350 million, but with a couple big hits here, this stock could wind up being a 10-bagger, based on how large this market is. Major players in the schizophrenia market – Johnson & Johnson (JNJ), AstraZeneca (AZN), Eli Lilly (LLY), Novartis (NVS) – are all enormous companies; they represent some of the top ten pharma companies worldwide. So, if you take, for example, JNJ's schizophrenia drug Risperdal, that company might decide to make ACP-103 a potential add-on treatment and either become partners with ACADIA or simply buy the company outright. Which would be more likely in a case like this – licensing a particular drug or buying the whole company? It's interesting. The more a company like ACADIA stays under the radar with its data remaining good, the better the chance of a straight buy-out. The more people discover this company's potential and the stock rises, the less of a chance for a buy-out. Right now, a major pharmaceutical company could definitely buy ACADIA for under a billion dollars. But three, four months down the road if the company's market cap goes up significantly, and suddenly a major player has to fork over $2 billion for it, they may not want to pay that much. So the big pharma company might just say they'd rather just license and market the drug, which would give ACADIA, say, $20 million and 20% of sales. That's still a good place to be as an investor in shares of ACAD. Assuming the remaining trials for the company's drugs turn out well, I see some sort of partnership unfolding. JNJ or Lilly could obviously sell ACP-103 a lot better than ACADIA could at this point. What eventually will happen remains to be seen, but either way, from an investor's standpoint, you're probably going to win. What are some other small-cap biotechs on your radar right now? Another similar company to ACADIA is Arena Pharmaceuticals (ARNA). Both of these are Southern California central nervous system-oriented biotechs with small market caps. Arena has a drug in phase II trials being developed for obesity. Now, the obesity market may just be the most underserved, underpenetrated large market in the industry. What's more, we haven't seen any successful drug candidates for the treatment of obesity since Phen-Fen. And all that drug did was cost Wyeth (WYE) $16 billion in legal liabilities. This drug candidate, called APD-356, has demonstrated that over 12-18 weeks patients can lose 8-10 pounds. This is significant. With a normal routine of diet and exercise, users of this drug can drop an additional ten pounds in three months. We see a huge market opportunity here. Arena's other phase II candidate is APD-125 for the treatment of insomnia. Though the insomnia market has come a long way with drugs like Lunesta and Ambien, it affects a very large number of people without many drugs on the market. This is partially because drugs like this are messing with large levels of serotonin in the brain, and the FDA is not always so comfortable with that. This company is still flying under the radar, as its drugs are still in phase II testing. For a lot of people, once they read phase III testing is successful – boom – they buy the stock. But I like to look at phase II drugs that already have a proven history, and I like to recommend these stocks a bit ahead of the game. Because once ACADIA and Arena are trading at $40, $50 per share, it's probably going to be too late. So would you say that once a candidate is in phase III testing, a lot of the value is already gone from the stock? Not necessarily. In the case of Renovis (RNVS), it's currently undergoing a phase III trial for its candidate NXY-059, which is being developed for treatment of stroke. This drug has already been licensed to AZN. Currently, only one drug on the market is approved for treatment of stroke: Activase by Genentech (DNA). However, this treatment is used in less than 5% of people with strokes due to the fact that the efficacy and safety are not very good. NXY-059 has shown good efficacy, tolerability and safety in its most recent trial. The Street has kind of ignored this, though, because it wasn't an efficacy trial, it was a safety trial. But I don't think they should ignore data like this. With stroke patients, safety is a big issue. These people may have motor problems or cardiovascular difficulties. The last thing they need is to take a drug that no one's sure is 100% safe. We're still waiting on the phase III efficacy of the drug, but previous tests had provided encouraging results. This is another enormous market. Stroke is second only to coronary artery disease as a cause of mortality in the developed world. Renovis has a $650 million cap right now with a potential $1.5-2 billion drug on its hands. This is definitely a potential one-hit wonder. The drug could generate $1 billion in sales shortly after entering the market. AZN will be responsible for 80% and give a royalty payment – a sizeable figure – to Renovis. This company stands to make a lot of money. What about ViroPharma? For weeks, you were perhaps the only sell-side analyst with a Sell on the stock, and now you're one of only a few turning positive on it. ViroPharma (VPHM), at this time last year, was less than $2 per share. The company has an antibacterial drug that treats the pathogenic bacteria C. difficile (CDAD), which causes diarrhea among patients taking certain antibiotics, called Vancocin. Sales of this drug have been really great, and the stock shot up from $2 to over $20. But last November, generic drug companies reported that they were considering making a generic version of Vancocin, which has no patent. The only protection Vancocin has from generic competition is that it's very complex and difficult to make, and would take years of clinical testing to create. In early March, I downgraded ViroPharma to a Sell. In my report, I acknowledged Vancocin was indeed difficult and complex, but not out of the realm of possibility for a generic company to eventually get a handle on. And as this is ViroPharma's only currently approved drug, I felt the shares were overvalued. Then, just a couple weeks ago, the FDA announced that it would entertain the idea to help streamline the process of creating generic Vancocin, and the stock tanked. Shares fell all the way to $11, and right around there I upgraded VPHM to a Hold. Even with the risk of generic Vancocin – which, instead of possibly hitting the market by 2010 would still be at least a couple years away – fair market value of ViroPharma, I feel, is around $16. Technically and under normal circumstances, this would mean I would change my recommendation to a Buy. But after a capitulation such as this – a stock falling from $20 to around $11 – shares almost never go right back up. Right now I'm waiting for things to settle, and we'll see what happens after a couple weeks or so. When considering small-cap biotech, what should investors be paying close attention to? There are three things I would consider: 1) be careful not to be buying hype. I can't stress enough how important it is to steer clear of biotech companies that have more hype than facts, so pay attention to a company's fundamentals and pipeline, 2) make sure your entry point is wise. Biotech is very risky, as everyone who bought shares of ViroPharma at $20 knows, and 3) always have a reasonable target in mind. What are your goals? If you bought ViroPharma at $8 because you were bullish on Vancocin, were you still so bullish when it got to $20? Not that any of this is really easy. Biotechs move more than any other stocks in the market, and can go up or down 50% in one day on a single piece of news. So you've got to know when to get in, when to get out, and pay close attention the whole time in between. Jason Napodano, CFA is a senior analyst covering the pharmaceutical industry for Zacks Equity Research. Courtesy: Learn More about Zacks Equity Research

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(HITT) - 2006 estimates have increased 12%

Hittite Microwave (HITT) has generated historically high levels of profitability. The company has exceeded earnings estimates for the past two quarters by an average of 17%. Four different analysts raised their numbers for 2006. Over the past 60 days, 2006 estimates have increased 12% to 84 cents per share. Full Analysis Hittite Microwave designs and develops high performance integrated circuits (ICs), modules and subsystems for radio frequency (RF), microwave and millimeterwave applications. The company was founded in 1985, has grown revenue sequentially every year for each of the last 14 years and has been profitable every year since 1986. Hittite's three largest markets are currently military, broadband, and microwave and millimeterwave, which comprised 70% of its September 2005 quarterly revenue. Its remaining markets include cellular infrastructure, automotive, test and measurement, space, fiber optics and other. Demand for mobile communications services has grown rapidly and appears poised for continued growth over the foreseeable future. This growth in systems using RF, microwave and millimeterwave technologies has accelerated demand for the analog, digital and mixed-signal ICs, modules and subsystems that Hittite provides. Hittite has a solid background with 20 years in the business and has developed competitive advantages over this time period, enabling it to differentiate its products and offerings. Although a competitive market, Hittite holds an advantage due to its broad product portfolio giving it the ability to offer products throughout the spectrum, while most of its competitors have more limited offerings. Most of its current competitors focus on one portion of the spectrum rather than offering products across all spectrums, or offer a single product over several spectrums rather than the wide range of products offered by Hittite. HITT has generated historically high levels of profitability. Gross margins have trended upwards every year, rising from 55.4% in 2002 all the way to 68.1% for 2005 as the company has been able to improve efficiencies and lower manufacturing costs, as well as an improved product mix. Operating margins have followed, rising from 19.3% in 2002 to 37.6% for 2005, in spite of increased investment in research and development and additional expenses associated with being a public company. On February 16th, Hittite Microwave announced results for the fourth quarter of 2005, ended December 31st. Revenue for the quarter was $22.7 million, representing an increase of 34.1% over the $16.9 million reported in the year ago quarter, and a 7.3% increase over the $21.2 million reported in the third quarter of 2005. Net income for the quarter was $7.1 million, or 23 cents per share, and increase of 106.4% over the $3.4 million reported in the year-ago quarter. Analysts had expected 19 cents. The company has exceeded earnings estimates for the past two quarters by an average of 17%. Four different analysts raised their numbers for 2006. Over the past 60 days 2006 estimates have increased 12% to 84 cents per share. The stock is valued at 32.7x next year's estimates of 96 cents per share, slightly above the long-term growth rate of 27.5%, giving the stock a reasonable PEG ratio of 1.19. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(ALB) - topped the consensus earnings estimate in six of the past seven quarters, most recently by 31.5%

Albemarle Corporation (ALB), a Zacks #1 Rank stock, has topped the consensus earnings estimate in six of the past seven quarters, most recently by 31.5%. The company achieved record revenues in the fourth quarter and full year of 2005. The Board of Directors recently increased its quarterly dividend. Analysts' earnings estimates have been on the rise for ALB. The company has a ROE of 13% and a price-to-book (P/B) multiple of 2.1. Full Analysis Albemarle Corporation develops, manufactures and markets specialty chemicals worldwide. The company operates in three segments: polymer additives, catalysts and fine chemicals. ALB sells its products to a range of customers, including manufacturers of electronics, building and construction materials, automotive parts, packaging, pharmachemicals and agrichemicals and to petroleum refiners. ALB has exceeded analysts' expectations in six of the past seven quarters by an average margin of 16.1%. Earnings per share are forecasted to grow 9.0% over the next 3-5 years. The company is scheduled to release its first-quarter 2006 results on Apr 26, 2006. On Jan 25, 2006, ALB reported fourth-quarter 2005 earnings per share of 71 cents. The Street projected 54 cents, thus, ALB surprised by 31.5%. The company posted profits of 46 cents per share in the prior year. Revenues for the quarter marked a new high—$588.2 million, up 30.4% from the fourth quarter of 2004. The company pointed to strong sales in its catalysts segment and continued pricing improvement in certain businesses across their polymer additives and fine chemicals segments. For the entire year, profits soared 109.7% to $114.9 million, compared to $54.8 million in 2004. Record net revenues for 2005 amounted to $2.1 billion, versus $1.5 billion in the prior year. The company increased revenues for the past four years. Analysts' earnings estimates have been trending higher for ALB. The consensus earnings estimate for this quarter and next have grown 14.6% and 6.1%, respectively, over the past 90 days. Forecasts for 2006 and 2007 profits were upped 4.7% and 8.4%, respectively, over the same time period. Seven analysts submitted upward revisions for 2006, while four have done so for 2007. The Board of Directors of ALB increased its regular quarterly dividend on Feb 8, 2006, to 16.5 cents a share from 16.0 cents. This represents the twelfth consecutive year the company announced a dividend increase, fueled by positive operating cash flows. ALB has a current dividend yield of 1.6%. ALB has a price-to-book (P/B) multiple of 2.1. The stock trades at a valuation of 17.8x trailing 12-month earnings and at 15.8x its current fiscal year estimated earnings. The company has a return on equity of 13%, slightly below the industry average of 16%. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(CBG) - earnings 16% higher than the consensus estimate

CB Richard Ells (CBG) is a stock in an uptrend and there is no reason to expect that to change in the near future. Background CB Richard Ellis Group is a global commercial real estate services firm offering a full range of services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other commercial real estate assets. Full Analysis It's been awhile since CBG released earnings on Feb 1, 2006; however, those earnings were spectacular. The company reported earnings per share of $1.29 for the quarter, up 43% from the year earlier quarter and 16% higher than the consensus estimate. Sales were strong at $956 million, up 78% from the same quarter last year. Income was a blowout, up 584% from last year's $99.9 million. Technical Review One of the very strongest technical patterns is a stock that consistently moves higher in small increments. And so it's been for CBG. It's been virtually straight uphill since early December, 2005. Having continued to move higher, CBG gapped higher on Tuesday. This is fairly common in this type of market action. Paying higher than yesterday for anything goes against human nature. We're all bargainers and much more comfortable buying on setbacks than paying up. Which is why this constant, small increment increase pattern so often leads to gap higher moves. Having tried to buy breaks that never come, traders get impatient and finally just reach for a stock. CBG is up nearly 37% for the year already, compared to the general market only being up 3.6%. As we asked sometime ago, "Why buy a stock that's already up substantially?" Again the answer lies in knowing the history of the stock that you're following. In 2005, the general market was up an insignificant 3%. Yet CBG managed a 75.4% return. The good Momentum trader knows that trends in motion tend to stay in motion, and the art of "Buying High and Selling Higher" so often leads to profits. Clearly CBG is a stock in an uptrend and there is no reason to expect that to change in the near future. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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Senior Analyst - Retail Expects Cut-Backs from Consumers

Retail Expects Cut-Backs from Consumers by Rob Plaza Mar 29, 2006 Concerns on the macroeconomic level have led directly to concerns about the retail industry lately. We spoke with senior retail analyst Rob Plaza, CFA for his views on this topic, both from an overview perspective and by way of discussing a few specific retail companies. How are current concerns about consumer spending starting to affect the retail industry? Well, the biggest concerns are those that have been with us awhile now: higher oil prices leading to higher gas prices at the pump, rising interest rates, and so forth. But until the last few months, rising interest rates haven't really hurt real estate prices. Just last week, there was a report out about prices of new homes coming down, the first time in awhile there's been a decline in the average spending price in many years. So finally the interest rate cycle has caused real estate to cool off, and that's where a lot of growth has come from in the economy. Not coincidentally, this is also where a lot of money has been pulled out by consumers and spent on retail products. The biggest concern now is that potential customers can no longer tap their house, can't refinance their mortgage, and can't take out a home equity loan and have what many people had been looking at as essentially free money. With higher gas prices, that's just something you learn to live with, so you get used to paying more. But that also means people have less money to spend. They don't go shopping at their favorite retailer and instead go to discount stores or wait for special events like 24-hour sales. Are you seeing this happening now, or is it more something you're expecting to see in the future? Both, really. It depends on the retailer. Things like this tend to come out pretty spotty. I'll get e-mails from companies I follow or used to follow, like Circuit City (CC), who just sent me an e-mail ahead of the flyer in the Sunday paper about a big two-day sale. This kind of thing is becoming a lot more frequent for a lot of retailers. Are stores targeting middle-income and lower-income customers expected to feel the hurt more than high-end boutiques? The farther down the food chain you go, the less income is coming in. If you're a low-paid worker, you likely still have to drive your car to work, so gas prices are obviously going to hit you harder than if you're middle-class. Higher gas prices might not even affect upper-income households' lifestyles at all. Now, I don't follow Wal-Mart (WMT), but that company's numbers have continued to be outstanding. This is a company that has been performing exceptionally well. For some of the companies I do cover in that general space, such as BJ's Wholesale (BJ) and Fred's, Inc. (FRED), we are seeing that stores like that are having some problems. You're going to be seeing – not so much on the luxury super high-end but in the sweet middle area that's done so well over the past few years – people scaling back, and this is expected to hurt retail. These consumers won't be buying the $1000 suit or the $150 outfit; they'll instead maybe go off-brand to save some money, and this will cause pricing pressures across the board. One thing retailers have had going for them is that job growth and wage growth have continued to overcome problems with higher gas prices and rising inflation. For whatever reason – pay raises, working longer hours, not paying as much toward health benefits – overall wage growth has continued to outpace inflation. No one's sure how long this can be expected to continue, but one thing's for certain: we're still spending gobs of money on retail at this point. So would you be considering market-weighting or underweighting retail stocks right now? Well, my basic answer is this: in almost any scenario, good retailers are good retailers, and that's where you want to play. Common knowledge is to buy retailers at the end of an interest rate upcycle – and it seems as if we're getting pretty close to that now – which tend to lift all boats. That's when retailers' trust goes up. When things aren't quite so easy, companies that manage their inventories are generally best, as they are the ones making the most amount of profits per square foot. Also, companies that don't have to resort to markdowns to sell merchandise also tend to do well. Things are a little different for companies that are hot. Take Zumiez (ZUMZ), which is really smoking right now, as kids still love that whole skateboarder look. Zumiez is transforming from a small regional base to expanding nationally. They continue to open new stores that are very popular, which is really juicing sales right now. Don't high-growth companies like Zumiez tend to have staggering P/Es? What's your take on this? Yes, that's definitely true of a company like Zumiez. I did manage to upgrade to a Buy a similar company called Citi Trends (CTRN) – it's also making the move from a regional company to a national brand – when it dipped a little recently, but ZUMZ is not letting me in. I will likely make this company a Buy at some point, but I'm still looking for a reasonably good price to do that. What are some of the other Buy recommendations you have right now? I was just going over my list today, in fact. I still like Cache (CACH) and Deckers (DECK), and I believe I will need to jack up my target on Select Comfort (SCSS) soon. And then Kirkland's (KIRK) got so cheap that I had to make it a Buy. A kind of strange thing happened earlier this month when a press release from Kirkland's came out saying only that the CEO had left the company. Period. No softsoaping the issue, no "going home to spend more time with the kids." Right around that point, the stock fell to under five bucks per share. But there's a good story with Kirkland's, as it is starting to move out of the big shopping malls to smaller strip malls, which is a better fit for them. The thing that's hurting its rival companies like Pier One (PIR) is that their stores are just too big, and take up a lot of square footage. That makes a company like Pier One have to do great business all the time, and if it brings in a product people don't want, it just kills them. So Kirkland's – which is not as big or diverse, product-wise, as Pier One – has done a good job scaling back, I think, and this should help them going forward. Any Sells you'd care to mention? I've had a few for quite awhile that might finally be upgraded soon, not necessarily because their story has gotten so much better but because earnings have finally started catching up with the share price. I'm thinking of both Dillard's (DDS) and Saks (SKS). I'm still most negative on Overstock.com (OSTK) – and they even had a jump recently. My negativity doesn't even have as much to do with the company's fundamentals as it does with the controversy over how many shares have been shorted. In a nutshell, it's a lot; there are basically no shares left to borrow. What this does is act as rocket fuel every time a piece of good news comes out, as short-sellers rush to cover their positions. But basically, the company has a losing business model, which is the reason so many people are shorting the stock in the first place. I'm still most negative on Overstock than any other company in this space. Rob Plaza, CFA is a senior analyst covering the retail industry for Zacks Equity Research. Learn More about Zacks Equity Research

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(STLD) - Analysts' earnings estimates have been on the rise

Steel Dynamics, Inc. (STLD), a Zacks #1 Rank stock, topped the consensus earnings estimate by 6.5% in the fourth quarter of 2005. The company stands to benefit from its announced merger with Roanoke Electric as well as its joint venture with Dynamic Composites. Analysts' earnings estimates have been on the rise for STLD. The company has a ROE of 27% and a price-to-book (P/B) multiple of 2.7. Full Analysis Steel Dynamics, Inc. is a steel manufacturing company in the United States. The company operates in two segments: steel operations and steel scrap substitute operations. STLD's customer base includes steel service centers, pipe and tube producers, original equipment manufacturers, steel fabricators, cold finishers, forgers and intermediate processors. On Jan 23, 2006, STLD reported fourth-quarter 2005 earnings per share of $1.31. With the Street expecting profits of $1.23 per share, STLD surprised by 6.5%. Earnings per share grew a staggering 88.0% over the past five years. For the entire year, net sales were up, while profits slipped. Net sales amounted to $2.2 billion, compared to $2.1 billion in 2004. STLD cited that although steel demand fell off sharply in the first half of the year, steel shipments rebounded in the second half, with backlogs remaining strong as the company moves forward in 2006. The company's earlier announced merger with Roanoke Electric Steel Corporation should close by the end of the first quarter of 2006. The company expects its steel making capacity could reach five million tons in 2006 as a result of the merger. The union will further diversify STLD's product base, enable greater penetration in the joist, truss, and girder markets and expand its geographical presence. Furthermore, on Mar 9, 2006, STLD announced a joint venture with Dynamic Composites to manufacture high-strength, long-life composite railroad ties. STLD will fund about $5 million and will substantially own and control the venture, according to the company. Composite ties have a perceived longer life and offer operational benefits and cost-effectiveness. On Mar 2, 2006, the Board of Directors at STLD approved a special cash dividend of 10 cents per common share in addition to the regular quarterly cash dividend of 10 cents. STLD plans to continue declaring this additional dividend during 2006 on a quarterly basis, leading to a total special cash dividend of 40 cents per share. The company is currently yielding 0.73%. Analysts' optimism has been growing when it comes to STLD. The consensus earnings estimate for this quarter and next have grown 30.4% and 8.2%, respectively, over the past 90 days. Forecasts for 2006 and 2007 profits were upped 18.9% and 23.1%, respectively, over the same time period. As was apparent with its special cash dividend, STLD has done a great job enhancing shareholder value. The company has a return on equity of 27%, compared to the industry average of 22%. STLD has a price-to-book (P/B) multiple of 2.7. The stock trades at a valuation of 12.6x trailing 12-month earnings and at 11.8x its current fiscal year estimated earnings. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(MS) - exceeded earnings estimates in 12 of the past 14 quarters

Morgan Stanley (MS) recently reported record first-quarter fiscal 2006 revenues. The company has exceeded analysts' earnings estimates in 12 of the past 14 quarters. Earnings per share are forecasted to grow 12.3% over the next 3-5 years. This Zacks #1 Rank stock has a current dividend yield of 1.7%. MS has a return on equity of 19%, compared to 13% for the industry average. Full Analysis Morgan Stanley is a global financial services firm that operates in four segments: institutional securities, retail brokerage, asset management and Discover. With more than 600 offices in 30 countries, the company's diverse client base includes corporations, governments, financial institutions and individuals. MS has topped the consensus earnings estimate for the past three quarters by an average margin of 24.8%. Furthermore, the company beat the Street in 12 of the past 14 quarters. Earnings per share grew 9.8% over the past five years and are projected to grow 12.3% over the next 3-5 years. On Mar 22, 2006, MS reported its first-quarter fiscal 2006 results. The company became the fourth major investment bank to post record quarterly revenues; the others being The Goldman Sachs Group, Inc. (GS), Lehman Brothers Holdings, Inc. (LEH) and The Bear Stearns Companies, Inc. (BSC). MS achieved revenues of $8.5 billion, compared to $6.8 billion in the prior year. Profits amounted to $1.79 per share, which crushed the Street's estimate by 43.2%. The company's profits in the first quarter of fiscal 2005 were $1.29 per share. Going forward, the company will direct resources, capital and people to areas in the institutional securities businesses, which offer the most attractive opportunities. These include emerging markets, leveraged finance, derivatives, principal investments and mortgages. The consensus earnings estimate for this quarter currently stands at $1.34. This represents a 10.7% increase over the past 90 days. Forecasts for full-year 2006 profits rose 7.1% to $5.31 over the same time period. MS's Board of Directors recently announced a quarterly dividend of 27 cents per share. The company is currently yielding 1.7%, with a five-year average dividend yield of 1.9%. Since the end of fiscal 2005, MS repurchased approximately 20 million shares of its common stock through. Moreover, MS has been more profitable, as measured by return on equity, than its peers. The company has a ROE of 19%, compared to 13% for the industry. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(BID) - EPS of 90 cents per share, a 58% increase

Sotherby's Holdings (BID) rose from Zacks Rank #3 (Hold) to Zacks Rank #1 (Strong Buy) on the strength of a strong earnings report and subsequent analysts' revisions. Background Sotheby's Holdings, Inc. is one of the world's two largest auctioneers of fine arts, antiques and collectibles, offering property in collecting categories, among them paintings, jewelry, decorative arts, and books. In addition to both live and Internet auctioneering, the auction segment is engaged in a number of related activities, including the purchase and resale of art and other collectibles and the brokering of art and collectible purchases and sales through private treaty sales. Full Analysis On Mar 7, 2006, Sotherby's delivered a strong fourth quarter. BID announced EPS of 90 cents per share, a 58% increase from the same quarter the previous year. In addition, the consensus estimate of 74 cents was beaten by almost 22%. Sales were strong, up 177% from the previous year at $204.8 million, while income was announced at $51.7 million versus a loss of 9.7 million. BID has exceeded consensus estimates for six out of the last seven quarters, which is convincing evidence that BID is completing a turn around. Shortly after the company released earnings, all analysts following BID raised their estimates for FY 2006. Technical Review Given all the good earnings news, it should come as no surprise that the stock reacted well in the market the following day. BID gapped higher and closed the day at $23.40, up 12%. In addition, BID's closing price was not only a new 52-week high, but it was the highest close since Mar 13, 2001, almost exactly five years earlier. Since the earnings report, BID has continued to move higher, indicating that the market has yet to discount the improving financials. Importantly, these new highs have occurred on significant volume, indicating strong accumulation of the stock. There is overhead resistance at $26.93, but that resistance point is more than five years old, so there is considerable question how potent selling at that level will be. Once that level is cleared, there is no significant upside resistance until the stock reaches $35.93. Content Courtesy: Zacks Investment Research #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(SII) - met or exceeded earnings estimates for 12 consecutive quarters

Smith International, Inc., (SII) is hitting on all cylinders. SII has met or exceeded earnings estimates for 12 consecutive quarters. During that time, year-over-year growth routinely exceeded 40%. Nine different analysts raised their numbers for 2006. Over the past 60 days, estimates for 2006 have increased 7.1% to $2.10 per share. The stock is cheap at 14.7x next year's estimates of $2.62 per share, below the long-term growth rate of 21%. This gives the stock a PEG ratio of 0.69. Full Analysis Smith International, Inc., (SII) is a major oilfield services company, engaged in providing a comprehensive line of products and engineering services to the oil and gas exploration and production industry, as well as to the petrochemical and other related industries. The company provides its products and services worldwide through four business units, which are grouped into two reportable segments: Oilfield Products and Services, and Distribution. The company's revenue and margin growth thus far has mostly been driven by its North American operations. With the expected ramp up in international and offshore activity levels, Smith International should continue to enjoy above-average revenue and margin growth. Geographic areas that are expected to strengthen include Europe/Africa, with the North Sea and West Africa as the main drivers, and the Middle East. In addition to the international markets, we expect North America to be strong with good performance from Canada and the U. S. offshore. Smith International is also experiencing pricing power in many of its products, particularly in the domestic market. The price increases are in part due to increasing costs of raw materials; however, the company has been able to pass on more than just the cost increases. The price increases will continue to help top-line growth throughout the year as new contracts reflect the higher prices. On the acquisitions front, Smith has acquired more than $400 million worth of proven products from niche industry players over the last three years. And given its strong balance sheet (current debt-to-total capitalization is about 32%), the company continues to have the flexibility to pursue acquisitions. The company has met or exceeded earnings estimates for 12 consecutive quarters. During that time, year-over-year growth routinely exceeded 40%. Nine different analysts raised their numbers for 2006. Over the past 60 Days, estimates for 2006 have increased 7.1% to $2.10 per share. The stock is cheap at 14.7x next year's estimates of $2.62 per share, below the long-term growth rate of 21%. This gives the stock a PEG ratio of 0.69. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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U.S. Automakers' Woes to Continue

U.S. Automakers' Woes to Continue With Paul Raman Mar 28, 2006 From sizable layoffs and labor disputes to high gas prices and a new market for hybrids, the U.S. auto industry has managed to claim and keep front-page headlines for some time. Senior auto analyst Paul Raman, CFA helped us understand what we most need to know about investing in the industry in 2006. The past couple years have been really rough for the U.S. auto industry. Do you see things improving soon? If so, how? The next couple of years are likely to be difficult. Companies are moving to reduce their legacy medical and retiree obligations. Plus, the number of employees will be reduced. This will lead to lower costs at the auto original equipment manufacturers (OEM) as well as the major auto suppliers. The costs for steel and other major raw materials will remain elevated, but should not move up further. Auto demand will remain weak due to rising interest rates--which makes it more expensive to finance an automobile purchase--and rising gas prices--which has reduced demand for the SUV--and rising imports. Pricing is likely to remain weak due to the need for incentives that will stimulate demand. What part do you expect hybrid cars to play for U.S. automakers in the future? Will they be able to compete with Japanese manufacturers, who have already gotten a head start? Hybrid cars represent a source of growth in the future should gas prices remain high. They represent only 1% of the market now. Market share gains by hybrids are likely to be slow due to slow consumer acceptance and skepticism. Japanese manufactures have taken the early lead, but Ford (F) is expected to be aggressive in this area in the next 3-4 years. Have labor issues progressed at all? Are they still problematic? Labor unions are cooperating with the OEMs and suppliers by allowing a reduction in medical and retiree obligations. They are also allowing for some layoffs, but still are protecting income per worker. They are still hindering the cost cutting progress that would occur in their absence. Furthermore, overseas companies do not have to deal with unions and health/retire issues, which is the source of their large cost advantage. What are your top Buy recommendations at this time? The Honda Motor Company (HMC) is expanding its business in Asia, growing its global network to increase efficiency and introducing new products to satisfy local markets. Further, capacity expansion plans in Asia, a new sales strategy in Japan, and a proposed launch of Accura in Japan make us optimistic about Honda's future prospects. Therefore, we rate it a Buy with a six-month target price of $31.25. Acquisitions, market share gains and product innovation are driving the top-line at Johnson Controls (JCI). The recent acquisition of York International will give JCI a leading position in the global buildings environments industry. Although high U.S. launch-costs, price concessions to OEM suppliers, rising commodity costs and an unfavorable product mix offset some of our enthusiasm, we remain optimistic about the stock. We rate the stock a Buy and set a six-month target price of $78.00. Also, Goodyear Tire (GT) is actively following its turnaround strategy and expects to achieve significant savings over the next three years. Restructuring and rationalization activities undertaken by management to contain costs and generate additional savings make us positive about the stock performance in the near-term. Additionally, GT is focusing on improving its efficiency by focusing on its core business areas. The company is witnessing a favorable selling price environment and product mix, as well as strong volume growth in the North American Tire business. Thus, we reiterate our Buy rating for the stock with a six-month target price of $19.50. What Sell recommendations would you care to mention here? Delphi (DPHIQ) management has a difficult road ahead. Volumes and prices are under pressure due to a weakening automotive market. Delphi's filing for bankruptcy to restructure its U.S. operations will result in little value for equity holders. Thus, we recommend a Sell with a six-month target price of $0.00. At Dana (DCN), a weak light-vehicle market and soaring raw material costs are influencing earnings. Additionally, downgrading of debt ratings by leading credit rating agencies raise our concern over the stock. As a result, we rate the stock a Sell, with a six-month target stock price of $ 4.25. Finally, we have a Sell on ArvinMeritor (ARM). Production cuts at original equipment manufacturers, rising raw material costs, falling light vehicle sales, increasing interest rates, and the uncertainty associated with the retiree medical expenses raises our concern over the company's profitability in the near term. As a result, we downgrade our rating on ARM to a Sell, with a target price of $14.50. What's your outlook on the industry for 2006? Our outlook for the auto and auto parts industry is neutral. We believe the group will track the S&P 500 in 2006. Investors should market-weight auto stocks for the time being. In the next six months, the auto group as a whole could benefit from steady raw material costs. However, we should see earnings that are in-line or slightly below still aggressive expectations. The group is likely to track the S&P in the next six months. We are neutral on this group due to low valuations. The industry is trading at 8-9X EPS, 2-3 times cash flow, and almost at 1X book value. Hence, there is little downside to these stocks. The auto industry is a mature sector. Demand for autos varies between -5% and 5%. In 2006, we expect growth to be 1-2% due to a slowly improving economy. Auto industry sales are affected by mixed trends. Auto industry sales have slowed due to rising interest rates. Rising interest rates affect auto sales because it makes it more expensive to finance an automobile purchase. Furthermore, rising gas prices have resulted in a slowdown in the industry's star product, the SUV. Imports have also been more competitive due to high gas prices, as they tend to have better gas mileage. Imports currently represent 37% of the auto sales in the U.S. Sales also have been helped by the strong real estate market, as people refinance their homes, take equity out, and buy cars. Hybrid cars represent a source of growth in the future should gas prices remain high. Market share gains will be slow, however, as it is too early to see significant new hybrid rollouts. It takes time to develop and roll out a new car. Paul Raman, CFA is a senior Zacks analyst covering the auto and auto parts industry. 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 current insights on key industries in the news along with their favorite stocks to buy and sell now. Learn More about Zacks Equity Research

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(SKX) - reported the highest annual revenues in its history

Skechers U.S.A., Inc. (SKX), a Zacks #1 Rank stock, recently reported the highest annual revenues in its history. Earnings per share are projected to grow 15.0% over the next 3-5 years. The company remains very optimistic heading into 2006. Analysts' earnings estimates for fiscal 2006 and fiscal 2007 have been on the rise. SKX has a price-to-book (P/B) multiple of 2.6. Full Analysis Skechers U.S.A., Inc. designs, developments, markets and distributes footwear for men, women and children worldwide. The Skechers brands include Skechers Sport, Skechers USA, Skechers Active, Somethin' Else from Skechers, Collection by Skechers, Skechers Work and Skechers Kids. The company sells its products primarily to department and specialty stores in the United States, Canada and European countries. SKX has met or topped analysts' earnings estimates in four consecutive quarters—meeting twice. In the two quarters in which the company beat the Street, it did so by an average margin of 26.9%. Earnings per share are projected to grow 15.0% over the next 3-5 years. On Feb 22, 2006, Skechers U.S.A., Inc. reported fourth-quarter earnings per share of 14 cents, which topped the Street's estimate by a penny. The company lost five cents per share in the prior year. Net sales jumped 8.2% to $223.5 million, compared to $206.5 million in the fourth quarter of 2004. For the entire year, profits for SKX were $44.7 million, versus $23.6 million in 2004. Net sales increased 9.4% to $1.0 billion. The company's record fourth quarter, combined with its record first and second quarters and strong third quarter, led to the highest annual revenues in SKX's history. Skechers U.S.A., Inc. is very optimistic that its momentum will continue into 2006. The company projects first-quarter 2006 net sales to be between $270 million and $280 million. Earnings per share are expected to be between 29 cents and 34 cents. Analysts' forecasts for 2006 and 2007 profits have been upped 5.3% and 10.2%, respectively, over the past 30 days. Analysts appreciate the company's ability to adapt to the changing tastes of its client base by regularly upgrading styles and designs. In early March, SKX signed a licensing agreement to design, develop and market men's footwear worldwide for the premier action sport lifestyle brand Zoo York. The agreement allows Skechers to enter a new consumer and account base—one that offers a great deal of growth opportunity. Skechers U.S.A., Inc. has a price-to-book (P/B) multiple of 2.6 and trades at a valuation of 18.7x its current fiscal year estimated earnings. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(TKA) - return on equity of 15%, compared to 11% for the industry average

Telekom Austria AG (TKA), a Zacks #1 Rank stock, recently reported a significant increase in profits. Earnings per share are forecasted to grow 12.5% over the next 3-5 years. The management board will recommend a 129% increase in its dividend, leading to a dividend of EUR 0.55 per share. The company has a return on equity of 15%, compared to 11% for the industry average. Full Analysis Telekom Austria AG is engaged as a telecommunications provider of long-distance, local and wireless services, corporate data communications services and Internet services. The company's customers include telecommunications operators and service providers, and business and residential end-users. While its services are offered primarily in Austria, TKA also provides mobile communications services in Croatia, Slovenia, Bulgaria and Liechtenstein. On Mar 14, 2006, Telekom Austria AG reported fourth-quarter and full-year 2005 results. The company's acquisition of Mobiltel in July 2005 contributed to the growth of major financial indicators. Financial figures of Telekom Austria for 2005 incorporate Mobiltel's results for the period from Jul 12 through Dec 31, 2005. Mobiltel is excluded from prior quarters. For the fourth quarter of 2005, revenues increased 14.3% to EUR 1,171.5 million. Profits soared by 66.4% to EUR 41.6 million. Higher operating income and lower tax expenses helped fuel quarterly results. For the entire year, revenues increased 7.9% to EUR 4,377.3 million, while profits of Telekom Austria ballooned 83.5% to EUR 417.1 million. The company increased profits for the past four years. Earnings per share are projected to grow 12.5% over the next 3-5 years. Telekom Austria AG projects revenue growth of about 5% in 2006. The company also believes that strong cash flows will enable it to reduce net debt as well as continue its share repurchase program. TKA bought back 2.9 million shares in the fourth quarter of 2005 for EUR 51.4 million. The consensus earnings estimate for 2006 currently stands at $2.61. This marks a 4.8% increase over the past 30 days. Based on the company's strong 2005 financial results, the management board of Telekom Austria will recommend a dividend in the amount of EUR 0.55 per share, compared to EUR 0.24 last year. This marks an increase of 129.2%. TKA is currently yielding 0.92%. The company has a return on equity of 15%, compared to 11% for the industry average. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(NTRI) - exceeded expectations for four quarters by an average of 31%

NutriSystem, Inc. (NTRI) has exceeded analysts' earnings expectations for four straight quarters by an average margin of 31%. Two analysts raised their estimates for 2006. Estimates for 2006 increased 23% over the past 60 days. Despite the strong run in the stock, it is attractively valued. NTRI is trading at 23.4x next year's earnings estimates of $1.85 per share, well below the long-term growth rate of 37%, giving the stock a PEG ratio of 0.63. Full Analysis NutriSystem, Inc. (NTRI) provides weight management system and fitness products and services in the United States. Its weight management program primarily includes a prepackaged food program and counseling. The company also offers online and telephone counseling and support to customers using its diet counselors. The company reported a strong fourth quarter by posting earnings of 17 cents per share, a penny ahead of expectations. Sales exploded four-fold from a year ago. Operating income in 2005 grew to $33,290,000 from $1,529,000 in 2004. Chief Executive Michael Hagan was understandably excited about the quarter. "2005 was an extraordinary year for us," said Michael J. Hagan, Chairman and Chief Executive Officer. "I believe the financial results speak for themselves, but I'm most proud of how our team responded to the challenge of managing the business through hyper-growth mode. We now have a platform to support higher levels of customer activity." "Additionally, we're off to a fast start with new customer additions in 2006," continued Mr. Hagan. "Our planned marketing spend for the first quarter 2006 is about three times greater than the first quarter of 2005, and we are projecting customer acquisition costs to be approximately the same as the first quarter of 2005. We are pleased with the return on our marketing investments." Management raised their outlook and projected first-quarter revenue between $122 million and $127 million with earnings between 40 cents and 42 cents per share. For 2006, the company sees revenue of $415 million to $425 million and earnings of $1.36 to $1.46 per share. Analysts projected first-quarter profit of 37 cents per share and revenue of $117.1 million, and full-year profit of $1.30 per share on revenue of $418.3 million. NTRI has exceeded analyst expectations for four straight quarters by an average margin of 31%. Two analysts raised their estimates for 2006. Estimates for 2006 increased 23% over the past 60 days. Despite the strong run in the stock, it is attractively valued. NTRI is trading at 23.4x next year's earnings estimates of $1.85 per share, well below the long-term growth rate of 37%, giving the stock a PEG ratio of 0.63. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. The ranks are updated every Monday morning on Zacks.com. 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 #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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(UIC) - 28.8% above the consensus estimate - headed for the sky

Just like its products,United Industrial Corporation (UIC) is headed for the sky. Background United Industrial Corporation is a high-technology company focused on the design and production of defense, training, transportation, and energy systems. Their products include unmanned air vehicles, training and simulation systems, automated aircraft test and maintenance equipment, and ordnance systems. They also manufacture ground transportation components, combustion equipment for biomass and refuse fuels, and specialized firefighter training installations. Full Analysis Thinking about it logically, one might expect defense stocks to be doing well, especially those stocks in high demand areas such as Unmanned Air Vehicles (UAVs). At least in the case of UIC, you'd be right. UIC released results for its December 2005 quarter on Mar 10, reporting earnings of 76 cents per share. That number was 68.9% above last year's 45 cents and 28.8% above the consensus estimate. Sales were up 51.9% from the same quarter the previous year. Technical Review UIC's chart looks like one of its unmanned vehicles taking off and climbing into the sky. For 2006, UIC is already up 39% and shows no sign of letting up. From late 2005 and into early 2006, UIC hung around the $45 per share range, never going too much higher or too much lower. During the three-day period from Feb 13, 2006 the stock clearly began a new move higher, moving decisively out of the $45 range on heavy volume. Since that time UIC has made numerous new 52-week highs as it continues to move upward. Still, breaking out of a trading range into new higher ground by itself would not be enough to make UIC our Momentum stock of the day. In addition to the higher gr