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Friday, September 22, 2006

(OSG) - Consensus estimates for this quarter and next quarter increased 77.4% and 48.1%, respectively

Overseas Shipholding Group, Inc. (OSG) topped the Street's earnings estimate in six out of the past eight quarters by an average margin of 22.1%. Profit forecasts for 2006 and 2007 have shot upward. The Board of Directors authorized a $300 million share repurchase plan and declared a quarterly dividend of 25 cents in June. OSG is currently yielding 1.7%. This Zacks #1 Rank stock has a price-to-book ratio of only 1.2, compared to 5.3 for the market.

Full Analysis

Overseas Shipholding Group, Inc. is the second-largest publicly traded oil tanker company in the world, measured by number of vessels. The company owns and operates an International Flag and U.S. Flag fleet of 90 vessels that transport crude oil, petroleum products and dry bulk commodities throughout the world.

OSG exceeded analysts' earnings expectations in six out of the past eight quarters by an average margin of 22.1%. In its most recent quarter the company came up short, missing the Street's estimate by six cents when it posted second-quarter earnings per share of $1.52. Revenues came in at $230.8 million from $238.4 million during the same period last year.

On Aug 7, the company announced a strategic partnership agreement with TransCanada CNG Technologies Ltd, a subsidiary of TransCanada Corporation (TRP), in which OSG will own and operate a new type of tanker vessel, capable of transporting large quantities of compressed natural gas (CNG). President and CEO of OSG Morten Arntzen stated, “Combining TransCanada's unique technology with OSG's in-depth knowledge of marine transportation and vessel construction will enable our respective companies to be the first to develop an efficient and commercially viable CNG vessel.”

Analysts' optimism regarding the company's future earnings potential has been skyrocketing. Consensus estimates for this quarter and next quarter increased 77.4% and 48.1%, respectively, over the past 60 days. For the full years of 2006 and 2007, profit forecasts jumped 24.4% and 17.2%, respectively, over the same period of time.

The Board of Directors authorized a $300 million share repurchase plan on Jun 9. At the time of the announcement, the approved dollar amount would be the equivalent of 15% of the company's total shares outstanding. Stockholders were also pleased when the Board declared a quarterly dividend of 25 cents per common share of stock on Jun 8. OSG has a current dividend yield of 1.7%

OSG is currently trading at a valuation of 6.7x trailing 12-month earnings and at 5.9x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 16.7x trailing 12-month earnings and at 15.8x its current fiscal-year estimated earnings. The company has a price-to-book ratio of only 1.2, compared to 5.3 for the market. OSG's return on equity of 18% tops the industry average of 15%.

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

#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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(MER) - Topped the Street's estimate in 15 out of the past 16 quarters by an average margin of 14.0%

Merrill Lynch & Co., Inc. (MER), first highlighted as a Growth and Income pick on Dec 9, 2005, continues to perform quite well. The company exceeded analysts' earnings expectations in 15 out of the past 16 quarters by an average margin of 14.0%. Net revenues for both the second quarter and the first six months of the year marked new records. Earnings per share are forecasted to grow 12.3% over the next 3-5 years. MER has a current and five-year average dividend yield of 1.3%.

Full Analysis

Merrill Lynch & Co., Inc., through its subsidiaries, provides broker-dealer, investment banking, financing, wealth management, advisory, asset management, insurance, lending, and related products and services on a global basis.

When MER was first presented as a Growth and Income pick on Dec 9, 2005, its strong history of exceeding analysts' earnings expectations was noted. By reporting three additional positive earnings surprises, MER has continued its winning ways. The company has now topped the Street's estimate in 15 out of the past 16 quarters by an average margin of 14.0%. Best of all, the stock is up 15% since its debut.

In its most recent quarter, MER achieved a 5.2% positive earnings surprise when it posted second-quarter profits of $1.6 billion, or $1.63 per share. Compared to the prior-year period, earnings soared 43.0%. Net revenues came in at a record $8.2 billion, versus $6.3 billion in the second quarter of 2005. The company repurchased 41.4 million shares during the quarter for a total cost of $3 billion. MER is expected to release results for the third quarter on Oct 17.

Net revenues of $16.1 billion in the first half of the year also marked a new record for the company, and were up 27.8% when compared to the first six months of 2005. Looking ahead, earnings per share are forecasted to grow 12.3% over the next 3-5 years.

In an effort to expand its mortgage servicing business, and to compete with Lehman Brothers Holdings Inc.'s (LEH) mortgage division, MER announced on Sep 5 its intention to acquire First Franklin, the mortgage business of National City Corp., (NCC) for $1.3 billion. In a separate transaction, MER was expected to purchase $5.6 billion of First Franklin's originated mortgage loans.

The Board of Directors declared a regular quarterly dividend of 25 cents per common share of stock on Jul 24. MER has a current and five-year average dividend yield of 1.3%. The company's return on equity of 15% is in line with the industry average.

MER 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 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. 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

#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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(HOKU) - Fuel cell technologies - Over the past month, this year's estimates have increased 25%

Hoku Scientific has exceeded earnings estimates in four consecutive quarters and has reported a profit in six straight quarters. One analysts raised his numbers for this year. Over the past month, this year's estimates have increased 25%. The stock is a small cap, low-priced equity, so volatility will be high, but the fundamentals and growth prospects are excellent.

Full Analysis

Hoku Scientific, Inc. (HOKU) engages in the design, development, and manufacture of membrane electrode assemblies (MEAs) and non-fluorinated membranes for proton exchange membrane (PEM) fuel cells.

It develops custom monomers and polymers for its Hoku membranes, the core technology of Hoku MEAs. Hoku MEAs and membranes are designed for use in the stationary and automotive markets.

Since its inception, HOKU has focused its efforts on the design and development of fuel cell technologies, including its Hoku MEAs and Hoku Membranes. The products have all been developed internally by the research and development team leveraging both pre-existing publicly available technology and its own proprietary developments.

Currently, HOKU derives substantially all of its revenue from Sanyo Electric Co., Ltd. and Nissan Motor Co., Ltd. through contracts related to testing and engineering services. The company pursued engineering service contracts in order to strategically fund the integration of its technology into its customers products. On August 10, 2005, the company completed its initial public offering of 3,500,000 shares of its common stock.

According to Zacks Equity Research Analyst Jon Kolb, management anticipates that revenue in fiscal 2006 and 2007 will principally comprise service and license revenue from Nissan and the U.S. Navy. Sales to Japan accounted for substantially all of HOKU s revenue in fiscal 2004 and 2005, and for the nine months ended December 31, 2005.

Dustin Shindo, chairman, president and chief executive officer of Hoku Scientific, said after its latest earnings report , "We are pleased to report our sixth consecutive profitable quarter, and the commencement of the demonstration phase of our U.S. Navy fuel cell contract. We are on-track to achieve the technical milestones in our Nissan fuel cell contract, and continue to work with Sanyo on joint testing of our fuel cell products."

HOKU has exceeded earnings estimates in four consecutive quarters and has reported a profit in six straight quarters. One analysts raised his numbers for this year. Over the past month, this year's estimates have increased 25%. The stock is a small cap, low priced equity, so volatility will be high, but the fundamentals and growth prospects are excellent.

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

#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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Thursday, September 21, 2006

(GRP) - Consensus estimates for this quarter and next quarter have risen 15.1% and 16.7%, respectively

Grant Prideco, Inc. (GRP), which is a Zacks #1 Rank stock, beat the Street's earnings estimate for the past 11 quarters by an average margin of 16.5%. The company posted record second-quarter results in late July and upped its earnings per share guidance for the full year of 2006 as a result. Consensus estimates have been on the rise. GRP has a price-to-book ratio of 4.1, compared to 5.3 for the market. Its PEG ratio currently sits at 0.46.
Full Analysis

Grant Prideco, Inc. is the world's leader in drill stem technology and drill pipe manufacturing, a global leader in drill bit technology and manufacturing and a leading provider of high-performance engineered connections and premium tubular products.

GRP's history of exceeding analysts' earnings expectations is truly remarkable, having done so for 11 consecutive quarters by an average margin of 16.5%.

On Jul 24, the company's profits for the second quarter amounted to $105.6 million, or 79 cents per share. The consensus earnings estimate for the quarter was 69 cents, thus, GRP surprised to the upside by a solid 14.5%. Its year-over-year improvement was even more impressive. The company's earnings in the prior-year period came in at 41 cents, representing a 92.7% advance in the second quarter of 2006. Revenues increased 36.3% to $431.8 million.

Chairman and CEO Michael McShane stated, “We are pleased to report another quarter of record earnings due to strong demand for our products and services.” As a result, the company upped its earnings per share forecast for the full year of 2006 to $3.20. GRP's previous guidance called for profits between $2.75 and $2.85 per share. Furthermore, McShane commented, “Record backlog and recent capacity increases in our Drilling Products division give us excellent visibility extending into 2007.” Over the next 3-5 years, analysts expect the company's earnings per share to grow at a 26% clip—topping the 24% forecasted growth rate of the industry.

During the quarter, the company bought back 709,600 shares of its stock for a total purchase price of $31.3 million. Year to date, GRP repurchased $51.5 million worth. Back in late February, the Board of Directors approved a stock repurchase program in which the company can buy back up to $150 million of its common stock.

Consensus estimates for this quarter and next quarter have risen 15.1% and 16.7%, respectively, over the past 60 days. Profit forecasts for the full years of 2006 and 2007 are also trending higher, jumping 10.7% and 10.6%, respectively, over the same period of time.

GRP is currently trading at a valuation of 15.2x trailing 12-month earnings and at 11.8x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 16.7x trailing 12-month earnings and at 15.7x its current fiscal-year estimated earnings.

The company has a price-to-book ratio of 4.1, compared to 5.3 for the market. Its PEG ratio currently sits at 0.46. GRP's return on equity betters that of the industry average—32% compared to 20%.

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

#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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(CNS) - Results represented a 33.3% year-over-year improvement

Cohen & Steers, Inc. (CNS) surprised to the upside by 12.0% when it posted second-quarter earnings per share of 28 cents. Furthermore, this represented a 33.3% year-over-year improvement. Both the quarterly revenue and assets under management figures were records for the company. CNS recently launched two new open-end mutual funds. Consensus estimates for this quarter and for the full year of 2006 have been on the rise for this Zacks #1 Rank stock. The Board of Directors boosted its quarterly dividend by 18% in early August.

Full Analysis

Cohen & Steers, Inc., together with its subsidiaries, operates as a manager of equity portfolios primarily in the United States. The company serves individual and institutional investors through a range of open-end mutual funds, closed-end mutual funds and institutional separate accounts. CNS also has a small investment bank that advises real estate businesses and REITs.

On Jul 26, CNS reported second-quarter earnings per share of 28 cents. With analysts forecasting 25 cents, the company surprised to the upside by 12.0%. Furthermore, the results represented a 33.3% year-over-year improvement.

Total revenues for the quarter jumped 9.9% to $42.1 million, compared to $38.3 million in the second quarter of 2005. Assets under management rose 16.6% and hit $23.2 billion. Both the quarterly revenue and assets under management figures were records for the company.

CNS recently opened two new U.S. registered open-end mutual funds. One is called Cohen & Steers Asia Pacific Realty Shares, which is the first U.S. open-end mutual fund with investments in Asia Pacific real estate securities. It was launched on Aug 3. Co-Chairman and Co-Chief Executive Officer Martin Cohen stated, “We believe that the market for real estate securities in the Asia Pacific region is positioned for attractive long-term returns.” The other, launched on Aug 21, is Cohen & Steers Institutional Global Realty Shares. At least 80% of the fund will be invested in a portfolio of equity securities of U.S. and non-U.S. real estate companies.

The consensus estimate for this quarter currently sits at 34 cents per share. Compared to the consensus of 60 days earlier, it has risen 25.9%. For the full year of 2006, profit forecasts climbed 8.8% to $1.11. Three analysts submitted upward revisions for both this quarter and for the full year.

The Board of Directors declared a quarterly dividend of 13 cents per share on Aug 3—an 18% increase when compared to the company's prior quarterly dividend of 11 cents per share. CNS has a current dividend yield of 1.5%. The dividend will be paid on Oct 23 to stockholders of record as of Oct 2.

Management at CNS has been extremely effective in building shareholder value, made very clear by the company's return on equity of 23%. This dwarfs the industry average of 9%.

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

#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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(VMC) - In early-August that its second-quarter profit rose 22% as margins improved, and raised its outlook for the year

Vulcan Materials has exceeded earnings estimates in two out of the past three quarters, with two analysts raising their estimates for this year. Over the past 60 days, this year's estimates have increased 10 cents to $4.74 per share, while next year's numbers have jumped 13 cents to $5.54 per share.

Full Analysis

Vulcan Materials Company (VMC) and its subsidiaries engage in the production, distribution, and sale of construction aggregates and other construction materials and related services in the United States and Mexico. Its construction aggregates include crushed stone, sand and gravel, rock asphalt, and recrushed concrete, which are used in highway construction and maintenance, as well as in the production of asphaltic and portland cement concrete mixes, and as railroad track ballast.

It also offers other products and services, including asphalt mix and related products, concrete, trucking services, and water transportation services. The company's customers include heavy construction and paving contractors; residential and commercial building contractors; concrete products manufacturers; state, county, and municipal governments; and railroads.

The company said in early-August that its second-quarter profit rose 22% as margins improved, and raised its outlook for the year. Revenue rose 14 percent to $888.2 million from $782.1 million last year, as the cost of revenue grew only 10 percent to $630.4 million.

The company forecast $1.40 to $1.56 per diluted share from continuing operations in the third quarter, and $4.60 to $4.85 for the full year, up from a previous estimate of $4.35 to $4.60.

Don James, Vulcan's Chairman and Chief Executive Officer, stated, "We are very pleased with the earnings growth realized in the second quarter. Revenue in all three major product lines increased sharply and margins continued to expand. The strong pricing momentum and solid demand for our products we experienced in 2005 is continuing in 2006.

The company has exceeded earnings estimates in two out of the past three quarters, with two analysts raising their estimates for this year. Over the past 60 days, this year's estimates have increased 10 cents to $4.74 per share, while next year's numbers have jumped 13 cents to $5.54 per share. The stock is attractively valued at 13.7x next year's estimates, well below the projected long-term growth rate of 25%, giving the stock a PEG ratio of 0.55.

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

#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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Wednesday, September 20, 2006

(GW) - For the full year of 2006, six analysts boosted their estimates and five followed suit for 2007

Grey Wolf, Inc. (GW), which is a Zacks #1 Rank stock, met or exceeded analysts' earnings expectations for the past nine quarters. Earnings per share are projected to grow 31.0% over the next 3-5 years. A number of analysts upped their profit forecasts after GW's solid second quarter. The company has a price-to-book ratio of 2.9, compared to 5.3 for the market. Its PEG ratio currently sits at 0.23.
Full Analysis

Grey Wolf, Inc. is a leading provider of contract oil and gas land drilling services in the United States, serving both major and independent oil and gas companies with a premium fleet of 114 rigs.

GW met or exceeded analysts' earnings expectations in nine consecutive quarters and in 14 out of the past 16. Earnings per share grew 8.9% over the past five years and are expected to grow by a much larger magnitude going forward—31.0% over the next 3-5 years.

On Jul 31, GW's second-quarter earnings per share came in at 23 cents, matching the Street's estimate while crushing its results in the prior-year period by a robust 91.7%. Revenues ballooned 48.5% to $239.6 million compared with revenues for the second quarter of 2005 at $161.3 million.

For the first six months of 2006, profits soared 121.3% to $112.2 million, while revenues jumped 48.6% to $462.5 million.

Chairman, President and Chief Executive Officer Tom Richards stated, “By logging record results in each of the past three quarters, Grey Wolf has provided substantial cash flow to finance current and future growth.” The company plans to upgrade its fleet with the cash flow as well as improve its balance sheet and return cash to its shareholders through the buyback of its common stock.

The company's current $100 million repurchase program was authorized by its Board of Directors on May 25. GW bought back 1.4 million shares valued at $10.4 million during the second quarter.

Since the company reported its second-quarter results, a number of analysts submitted upward earnings estimate revisions. Four analysts raised their profit forecasts for this quarter while five did so for next quarter. For the full year of 2006, six analysts boosted their estimates and five followed suit for 2007.

GW is currently trading at a valuation of 9.6x trailing 12-month earnings and at 7.2x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 16.7x trailing 12-month earnings and at 15.7x its current fiscal-year estimated earnings.

The company has a price-to-book ratio of 2.9, compared to 5.3 for the market. Its PEG ratio currently sits at 0.23. GW's return on equity more than doubles that of the industry average—43% compared to 20%.

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

#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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(OMM) - Consensus estimates have been on the rise for this quarter and next quarter, jumping 27.5% and 19.6%, respectively

OMI Corporation (OMM) beat the Street's earnings estimate in seven out of the past eight quarters by an average margin of 8.8%. On Sep 11, the Board of Directors approved an increase in the company's quarterly dividend and boosted its share repurchase program by $70 million. This Zacks #1 Rank stock has a current dividend yield of 1.9% and a five-year average dividend yield of 0.79%.

Full Analysis

OMI Corporation provides seaborne transportation services for crude oil and petroleum products in the international shipping markets. The company's customers include major independent and state-owned oil companies, major oil traders, government entities and various other entities.

Over the past eight quarters, OMM topped analysts' earnings expectations on seven occasions by an average margin of 8.8%, while matching the consensus estimate once.

In the second quarter of 2006, the company posted profits of 78 cents per share (excluding the sale of three Suezmax vessels that represented a gain of $78 million). This marked a 20.0% positive earnings surprise. Earnings in the prior-year period came in at 55 cents per share. Revenues jumped 23.4% to $183.3 million from $148.5 million in the second quarter of 2005.

Chairman and Chief Executive Officer Craig H. Stevenson, Jr. stated, “On both a net income and earnings per share basis, the quarter was the best in the company's history. Even excluding gains from sales of vessels, it was the best second quarter in our history.”

On Sep 11, the Board of Directors boosted it quarterly dividend by 25% to 12.5 cents per share from 10 cents. The dividend will be paid on Oct 11 to shareholders of record as of Oct. 2. OMM has a current dividend yield of 1.9% and a five-year average dividend yield of 0.79%.

The Board further enhanced shareholder value by increasing its share repurchase program by $70 million. The company now has the authority to buy back $113.6 million of its common stock.

Consensus estimates have been on the rise for this quarter and next quarter, jumping 27.5% and 19.6%, respectively, over the past 60 days. Four analysts revised their estimates upward for this quarter, while three did so for next quarter. Profit forecasts for this year and next are up 18.2% and 15.9%, respectively, over the same period of time. Four analysts revised their forecasts upward for this year as well as for next year. Earnings per share are forecasted to grow 17% over the next 3-5 years, with the industry expected to grow at a 15% clip.

OMM's return on equity, a common measure of a company's level of profitability, nearly doubles that of the industry average—27% compared to 15%.

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

#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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Click for full article

(AKS) - Consensus earnings estimates have also risen over the past two months - Exceeded earnings estimates in 10 out of the past 12 quarters

AK Steel has exceeded earnings estimates in 10 out of the past 12 quarters. One analyst has raised his numbers over the past 60 days for both this year and next year. Consensus earnings estimates have also risen over the past two months. The company is now expected to earn 99 cents per share this year, up from 92 cents 60 days ago. Similarly, AKS is slated to earn $1.10 per share next year, up from 93 cents.

Full Analysis

AK Steel Holding Corporation (AKS) is a leading producer of flat-rolled carbon, stainless, and electrical steel. It operates seven steel making and finishing plants in Ohio, Pennsylvania, Indiana, and Kentucky. The company s steel operations include AK Tube, which converts flat-rolled steel into welded steel tubing for use in the automotive, large truck, and construction markets, along with European trading companies that buy and sell steel and steel products.

The company's steel products are also consumed by the appliance, industrial machinery and equipment, and construction sectors. Its steel products include aluminum-coated stainless steel, coil-coated steel, cold-rolled coated steel, electro-galvanized steel, hot-dipped galvanized steel, and hot-rolled steel.

According to Zacks Equity Research Analyst Paul Raman, higher contract prices, increased surcharges to combat rising raw material costs, cost reduction initiatives, and capacity expansion are expected to improve AKS' s profitability in the long run.

AK Steel is likely to benefit from higher renegotiated contract prices and surcharges imposed to offset cost inflation. Nearly 70% of the company's 2006 business is under contract, 67% of which AKS has renegotiated at higher prices, which will help in boosting margins in spite of lower spot steel prices.

Moreover, based on strong demand conditions, AKS expects a double-digit increase in the new contract prices of oriented electrical steel products. The company is negotiating a progressive new labor agreement to allow for a more flexible and lower cost structure.

The company has exceeded earnings estimates in 10 out of the past 12 quarters. One analyst has raised his numbers over the past 60 days for both this year and next year. Consensus earnings estimates have also risen over the past two months. The company is now expected to earn 99 cents per share this year, up from 92 cents 60 days ago. Similarly, AKS is slated to earn $1.10 per share next year, up from 93 cents.

AKS is trading at an attractive forward price-to-earnings ratio of 11.5, well below the projected long-term growth rate of 20%, giving the stock a PEG ratio of 0.57.

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

#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.

| Blog Home| VitalStocks Home
Click for full article

Tuesday, September 19, 2006

(JLL) - EPS of $1.94 easily surpassed expectations of $1.02

Jones Lang LaSalle has exceeded earnings estimates in four of the past five quarters, with the last two periods averaging a positive surprise of almost 119%. Two analysts raised their estimates for this year, while one has done so for next year. Over the past two months, this year's estimates have jumped 9% to $4.26 per share, while next year's numbers have increased 4.9% to $4.49 per share.

Full Analysis

Jones Lang LaSalle, Incorporated (JLL) is a leading full-service real estate firm that provides corporate, financial, and investment management services. The company caters to corporations and other real estate owners, users, and investors worldwide. A broad real estate product and service range, and extensive knowledge of domestic and international real estate markets, enable Jones to operate as a single-source provider of real estate solutions.

JLL was formed following the 1999 merger of LaSalle Partners, Incorporated, and Jones Lang Wootton companies. Its diverse operations span more than 100 markets in approximately 34 countries across the globe. The company divides its business into two primary segments: Investor and Occupier Services (IOS), and Investment Management (IM).

The company's investment management division is showing strong growth. Advisory fees increased 28% from last year as assets under management continues to increase. The revenue increase in the investment management business can be attributed to fees from asset sales and strong portfolio performance, which produces incentive fees. Lasalle Investment Management raised over $3 billion in 2005, and assets under management has now reached $34 billion, an increase of 13% from the end of 2005.

Zacks Equity Research Analyst Greg Sukenik expects funds under management to continue growing at a healthy pace this year. In the company's latest global real estate capital report in March of this year, JLL reported that global direct real estate investment reached $475 billion in 2005, a 21% increase over 2004. Investment was particularly strong in North America, specifically CBD office markets which continue to see large capital inflows from all over the world.

JLL reported an outstanding second-quarter in late-July. EPS of $1.94 easily surpassed expectations of $1.02. All of the firm's operating segments achieved strong increases in revenue for both the second quarter and year-to-date 2006 compared with the same periods of the prior year. Revenue for the second quarter of 2006 was $510 million, an increase of 57 percent in U.S. dollars and 58 percent in local currencies.

The company has exceeded earnings estimates in four of the past five quarters, with the last two periods averaging a positive surprise of almost 119%. Two analysts raised their estimates for this year, while one has done so for next year. Over the past two months, this year's estimates have jumped 9% to $4.26 per share, while next year's numbers have increased 4.9% to $4.49 per share.

JLL is currently trading at 19.6x next year's estimates, slightly above the projected long-term growth rate of 15%, giving the stock a PEG ratio of 1.31.

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.

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(TW) - Earnings per share are forecasted to grow 17% - exceeds the 12% projected growth rate of the industry

21st Century Insurance Group (TW) exceeded analysts' earnings expectations for five consecutive quarters by an average margin of 18.4%. Consensus estimates for this year and next year have been on the rise. The company has a current dividend yield of 2.1% and a five-year average dividend yield of 1.2%. TW's return on equity tops that of the industry average—12% compared to 11%.

Full Analysis

21st Century Insurance Group insures over 1.5 million vehicles across the nation, making the company one of the largest direct-to-consumer personal auto insurance providers in the country.

TW topped analysts' earnings expectations for the past five quarters by an average margin of 18.4%. On Jul 26, the company reported second-quarter profits of $28.3 million, or 33 cents per share. Analysts were expecting 24 cents. In the prior-year period, TW reported profits of $20.5 million, or 24 cents per share.

For the first six months of the year, profits increased 24.3% to $49.6 million versus $39.9 million in the first six months of 2005. TW increased revenues for the past six years. Earnings per share are forecasted to grow 17% over the next 3-5 years. This exceeds the 12% projected growth rate of the industry.

Consensus estimates for the full year of 2006 currently sit at $1.06. This marks a 7.1% jump when compared to the consensus of 60 days ago. Looking ahead to 2007, profit forecasts are calling for $1.07 per share, representing an 8.1% increase over the same period of time.

The Board of Directors announced a quarterly cash dividend of eight cents per common share of stock on Sep 13. The dividend is payable on Oct 6 to shareholders of record as of Sep 25. The company has a current dividend yield of 2.1% and a five-year average dividend yield of 1.2%.

The company's national expansion strategy has been quite impressive. TW expanded into Arizona in 1996; into Nevada, Oregon and Washington in 1998; into Illinois, Indiana and Ohio in 2004; into Texas in 2005 and into Florida, Georgia and Pennsylvania in 2006.

TW has a return on equity of 12%, compared to the industry average of 11%. This indicates that TW's management has been more successful than the industry in enhancing shareholder value.

TW 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 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. 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.

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(OII) - Over the past six quarters, the average earnings surprise was 12.2%

Oceaneering International, Inc. (OII), first featured as a Value stock on Mar 1, continues to trade at a discounted valuation despite strong fundamentals and an encouraging outlook. The company topped the Street's earnings estimate for six straight quarters by an average margin of 12.2%. This Zacks #1 Rank stock recently upped its full-year 2006 earnings per share guidance. OII has a price-to-book ratio of 2.7, compared to 5.3 for the market.

Full Analysis

Oceaneering International, Inc. is an advanced applied technology company that provides engineered services and hardware to customers who operate in marine, space and other harsh environments. The company's products and services are marketed worldwide to oil and gas companies, government agencies and firms in the telecommunications, aerospace and marine engineering and construction industries.

When OII was first introduced as a Value stock back on Mar 1, it had exceeded analysts' earnings expectations in four consecutive quarters. Since that time, the company has added two additional positive earnings surprises. Furthermore, consensus estimates continue to trend higher. This combination is what has enabled OII to maintain its membership in the elite class of Zacks #1 Rank stocks.

Over the past six quarters, OII's average margin of surprise was 12.2%. Its most recent came on Aug 2 when the company posted record second-quarter earnings of 56 cents per share. Analysts were calling for 50 cents. When compared to the prior-year period, earnings skyrocketed 103.6%. Improvements in the company's Remotely Operated Vehicle, Subsea Products and Subsea Projects operating profits fueled the record quarter. Revenues came in at $311 million, significantly higher when compared to revenues of $236 million achieved in the second quarter of 2005.

President and Chief Executive Officer T. Jay Collins stated, “Net income was at a record level for the fifth consecutive quarter as we continued to benefit from high demand for our subsea services and products.” He went on to issue new earnings per share guidance for the full year of 2006. The company now projects profits between $2.00 and $2.10 per share, compared to its previous outlook which called for earnings per share between $1.80 and $1.95. If achieved, the yearly results would represent growth of approximately 70% to 80% over OII's 2005 performance.

Consensus estimates for this quarter and next quarter are up 9.8% and 12.2%, respectively, when compared to estimates of 60 days ago. Profit forecasts for the full years of 2006 and 2007 have risen 10.4% and 12.3%, respectively, over the same period of time.

OII is still trading at a discounted valuation six months after its debut as a Value stock. The company is currently trading at a valuation of 14.6x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 15.7x its current fiscal-year estimated earnings. The company has a price-to-book ratio of 2.7, compared to 5.3 for the market.

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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Monday, September 18, 2006

(LMT) - (MFC) - Top picks for new buying - Dow Theory Forecasts newsletter

Richard Moroney, editor of the Dow Theory Forecasts newsletter, explains that the market faces some near-term headwinds. Find out what this featured expert has to say about May highs, the performances of past Septembers and the earnings preseason. Then check out a couple buy recommendations.

MARKET COMMENTARY from September 11

When the German playwright Goethe wrote that "what does not kill me makes me stronger," he was not talking about the stock market. But more than a few writers have applied this idea to market advances, as rallies able to surmount obstacles tend to have staying power. This idea is especially applicable today, as the market faces several near-term hurdles:

*The May highs. The Dow Industrials have moved within 2.5% of their May high of 11,642.65, while the S&P 500 Index has moved within 2% of the May high of 1325.76. Traders will be watching these points closely, for a failed attempt at new highs is likely to trigger selling. New highs would not change the status of the Dow Theory. But closes above the levels reached in May, when optimism was running fairly high on Wall Street, would suggest that the majority money opinion expects a favorable environment for stocks.

*The calendar. Since 1950, September has been the worst-performing month for the Dow Industrials, S&P 500, and Nasdaq Composite — by a wide margin. For the S&P 500, the average monthly loss in September is 0.8%, with 23 gains and 33 losses. Only February and August also have average monthly losses, and September is the only month with more losses than gains.

*Earnings preseason. Earnings-estimate trends remain mostly favorable, though September-quarter profit warnings for S&P 500 companies are running slightly above historical norms. Estimate trends should be watched closely over the next month, as should the market’s ability to weather the high-profile profit shortfalls announced every quarter.

Conclusion

The market faces some near-term headwinds, so continued strength over the next month would bode well for the fourth quarter. For now, an opportunistic, slightly defensive stance remains appropriate. Top picks for new buying include Lockheed Martin (LMT) and Manulife Financial (MFC).

Content Courtesy: Zacks Investment Research

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(HD) - (MRO) - (CNW) - Validea Hot List newsletter

John Reese, editor of the Validea Hot List newsletter, reviews the recent and long-term performance of the Validea Hot List portfolio. The last couple of weeks did produce a down turn for the Hot List stocks. However, this featured expert has plenty to be proud of over the long-term. Read his commentary and take a look at a portfolio addition as well as some current holdings.

The Validea Hot List

The performance of the Validea Hot List the past two weeks has been weak. It is down -4.3 percent, versus a 0.2 percent gain by the S&P 500. Year-to-date, the Validea Hot List is up 15.3 percent, versus a gain of 3.7 percent by the S&P 500. Since the inception of the Validea Hot List, the S&P 500 is up 29.3 percent while the Validea Hot List is up 155.8 percent.

What does the performance of the Validea Hot List during the last two weeks mean? It just means that the normal ebbs-and-flows of investing in the market have created a down period for the Validea Hot List. No one beats the market week after week or even month after month or quarter after quarter. Even the best of investors have down years, and they pay no attention to swings that happen over periods as short as two weeks.

John Reese, and his team have been fortunate in consistently beating the market over the medium and long term. They have beat the market every year since the inception of the Validea Hot List, and they have beaten it virtually every quarter. But Reese, and his team don't beat it week in and week out. It's the long-term that they pay attention to, and so should you.

An Addition to the Hot List

Con-way (CNW)

This freight transportation and logistics company is favored by two guru strategies. One of the gurus is David Dreman.

The David Dreman Strategy

Some of the aspects of Con-way liked by the Dreman strategy: It has a market cap that places it within the 1,500 largest companies, its P/E and price-to-cash flow ratios are among the bottom 20 percent of the market (making it a contrarian stock), its current ratio exceeds the average of its industry and its payout ratio is 8.62 percent versus the 10.87 percent that has been its historical payout ratio. In addition, its return on equity is a very strong 29.75 percent and its pretax profit margins are 8.66 percent.

Other Hot List stocks include:

Marathon Oil Corporation (MRO) is engaged in the exploration and production of crude oil and natural gas on a worldwide basis. The Company operates in three business segments: Exploration and Production (E&P), Refining, Marketing and Transportation (RM&T) and Integrated Gas (IG). The E&P segment explores for and produces crude oil and natural gas on a worldwide basis. The RM&T segment refines, markets and transports crude oil and petroleum products, primarily in the Midwest, the upper Great Plains and southeastern United States. The IG segment markets and transports natural gas and products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol on a worldwide basis. On June 30, 2005, the Company acquired the remaining 38% ownership interest in Marathon Ashland Petroleum LLC (MAP). As a result of the acquisition, MAP became a wholly owned subsidiary of Marathon and was subsequently renamed as Marathon Petroleum Company LLC (MPC).

The Home Depot, Inc. (HD) is a home improvement retailer. As of January 29, 2006, the Company operated 2,042 stores. The Home Depot stores sell an assortment of building materials, home improvement and lawn and garden products, and provide a number of services. The Home Depot stores average approximately 105,000 square feet of enclosed space, with approximately 23,000 additional square feet of outside garden area. As of January 29, 2006, it had 1,984 The Home Depot stores. In addition to The Home Depot stores, the Company has a retail store format that sells products and services primarily for home decorating and remodeling projects called EXPO Design Center. It also has two retail store formats focused on professional customers called Home Depot Supply and The Home Depot Landscape Supply. During the fiscal year ended January 29, 2006 (fiscal 2005), the Company acquired Williams Bros. Lumber Company, Chem-Dry, Contractors' Warehouse and National Waterworks, Inc.

Content Courtesy: Zacks Investment Research

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(ADP) - (DCI) - (GPS) - (GPC) - (BBY) - Shareholder-Friendly Policies Lead to Outstanding Results

Paul Tracy, editor of the StreetAuthority Market Advisor newsletter, says investors don't have to fall victim to corporate excesses and accounting blow-ups. There are plenty of warning signs to look for and plenty of specific ways to identify highly-transparent, shareholder-friendly firms. Read about a few of the features this expert looks for in evaluating a company's shareholder friendliness.

FEATURE ARTICLE from September 1

It's hard to imagine that Dennis Kozlowski used to be regarded as one of America's most successful and highly respected chief executive officers. Kozlowski was once widely credited for Tyco International's (TYC) tremendous growth spurt in the 1990s.

Now, Tyco's ex-CEO is one of the world's best-recognized symbols of corporate greed and the devastating impact it can have on shareholders' investments. He has been sentenced to prison for misappropriating as much as $400 million from Tyco in his ten years at the helm. Among his more flamboyant expenditures: a $1 million birthday party in Sardinia for his wife and a $30 million New York apartment complete with $6,000 shower curtains, all largely paid for by Tyco. The ultimate losers in all of this extravagant spending were Tyco's owners -- the shareholders. Tyco stock plummeted as much as -80% off of its 2002 highs as news of the scandal broke.

Fortunately, managers and executives that commit misappropriations on the scale of Dennis Kozlowski are the exception rather than the rule. But just because there's no outright fraud or illegal acts doesn't mean a company's management team is being a proper, responsible steward of shareholder funds.

For instance, excessive pay packages aren't necessarily illegal, even for companies that are losing money or missing their profitability targets. The same is true of stock-option grants to managers or company-financed corporate jet use. In most cases, such expensive perks do very little to enhance shareholder value.

Take the recent options expensing scandal as an example. For years, companies did not have to legally report the options they issued to managers as an expense on their income statement. However, these options were a form of compensation. If the company's stock did well, managers would exercise the options and be issued shares, thus increasing the company's outstanding share count. That, of course, is the opposite of a share buyback and has the effect of diluting the value of a firm's existing shares.

And of course, poor accounting and financial transparency can be devastating for shareholders. Companies that only disclose the bare minimum during quarterly earnings releases tend to see more surprises and volatility in their stock; due to the lack of information, investors and analysts find it difficult to accurately evaluate their corporate prospects.

The use of aggressive, misleading accounting tricks to boost returns can lead to disastrous stock performance. Enron went bankrupt after revealing more than a billion dollars in losses held in off-balance sheet financing vehicles. However, some savvy investors were not at all surprised by Enron's corporate meltdown. In the years leading up to that announcement, many analysts had complained about the poor quality and lack of transparency in the company's releases. And more recently, shares of both Fannie Mae (FNM) and American International (AIG) swooned after those two companies announced accounting irregularities on a smaller scale.

Shareholder-Friendly Policies Lead to Outstanding Results

Fortunately, the concept of corporate stewardship cuts both ways -- companies with a history of aligning their interests with those of shareholders routinely outperform their peers. In addition, firms with highly transparent accounting policies and solid, complete disclosure are less likely to generate negative surprises for shareholders. And finally, companies that perform shareholder-friendly policies like stock buybacks and dividend distributions can directly enhance shareholder value.

Even better, investors don't have to fall victim to corporate excesses and accounting blow-ups. There are plenty of warning signs to look for and plenty of specific ways to identify highly-transparent, shareholder-friendly firms. Here are a few of the features Paul Tracy and his team look for in evaluating a company's shareholder friendliness:

Insider Ownership -- One of the easiest ways to know if management's interests are aligned with common shareholders is to look for management teams that are also major shareholders. For most companies, look for insiders to own at least 5% of the company's stock. For larger companies, Tracy and his team look for senior management to have equity stakes in the companies they manage that are significant relative to their annual salaries. When analyzing insider ownership, Tracy and his team pay particular attention to holdings owned by the CEO, CFO and COO. Typically, if an officer owns stock worth at least double his/her annual compensation, then this is a positive sign.

Share Buybacks -- Companies that continually buy back stock are directly boosting shareholders' stake in the firm. The effect is not on total earnings, but instead shows up on a company's earnings per share (EPS) -- total earnings divided by total shares outstanding. As a firm repurchases its shares, its existing shareholders own a larger and larger slice of the firm's earnings pie, thereby boosting EPS. This is one of the most shareholder-friendly policies a company can pursue.

Be sure to pay attention not only to a company's announced buyback plans, but also to the actual trend in the share count over time. When companies are buying back shares, the share count should consistently drop over time. Companies with buyback plans that have a stable or rising share count may simply be buying back stock to neutralize the effect of shares issued as compensation for employees.

Low Debt -- Bond and debt holders have first claims on a company's assets in the event of bankruptcy -- bondholders must be paid before shareholders get a dime. Therefore, managers of companies with an excessive amount of outstanding debt may be more focused on paying bondholders and meeting interest payments than on generating value for shareholders.

Perhaps even more importantly, companies with excessive debt loads carry a higher risk of folding when times get tough. The investment landscape is littered with bankrupt companies that took on piles of debt to fund aggressive expansion, only to flounder at the first sign of an economic slowdown. Typically, Tracy and his team prefer companies with debt-to-equity ratios (total debt divided by shareholder's equity) of less than 40%. Management teams that take on excessive debt are playing a high-risk game with your investment dollars.

High Return-on-Equity (ROE) -- Return-on-Equity is one of Warren Buffett's favorite financial ratios. ROE is calculated by dividing net income by shareholder equity. Since shareholder equity is a measure of shareholders' total investment in the firm, ROE is essentially a measure of how much value a company generates for shareholders. Shareholder-friendly firms tend to have higher ROE levels.

As a rule of thumb, Tracy and his team prefer to invest in companies with ROEs of close to 20% or higher. They also examine ROE ratios for several years and focus on companies with consistently high ratios.

Management Compensation -- The salaries of all company directors and senior managers are disclosed in financial statements. There is no hard and fast rule for what constitutes excessive compensation -- evaluating salary packages is somewhat subjective.

Be sure to examine the size of senior managers' salaries relative to the size of the company. Obviously, managers at a firm with $100 million in annual revenues should be earning less than managers at a multi-billion dollar behemoth. Moreover, evaluate compensation relative to performance. Some managers will actually take significant salary cuts when financial performance is poor. Compensation can even be tied to certain performance metrics. The details of managerial compensation packages are often disclosed in annual reports and company filings.

Options Issuance -- Earlier in today's article, Tracy and his team highlighted the potential dilutive effects of options. Issuing options to managers is not as common as it was in the late-1990s. New accounting rules regarding the expensing of options have made it less attractive to issue excessive options packages to employees and top company officers.

Nonetheless, some options or share compensation is not necessarily a bad thing, as management ownership aligns management's interests with shareholders. Just as with overall compensation, there's no hard and fast rule here. Options issuance should be examined relative to a company's size and financial performance. The same is true of shares a company issues directly to managers.

Exceptional Accounting Charges -- Exceptional charges are supposed to be one-time charges to account for unusual events such as legal settlements, inventory write-offs, or insurance deductibles. The idea of a one-time charge is that the expense does not reflect the company's normal course of business and should therefore be excluded from its normal operating results. By contrast, if charges are recurring events, then they should be accounted for as normal expenses.

But some companies take advantage of this accounting rule by regularly announcing "one-time" charges. By doing this, management can obfuscate expenses and make the business appear more profitable than it really is. While this trick can work for a little while, eventually a company's true fundamentals will become apparent. This sets up shareholders for some major negative surprises. As a general rule, you should avoid companies that post frequent one-time charges or sizeable accounting charges that aren't fully explained in financial statements.

Frequent Surprises -- No company meets or exceeds Wall Street expectations in every quarter. But some companies seem to constantly report earnings that are below expectations quarter after quarter. Usually, this results in large downside moves in the stock after each earnings report.

A few missteps can be forgiven, but if a company is serially disappointing Wall Street, then this can be a sign that management is misleading analysts. Alternatively, management may simply not be providing transparent information to investors so that they can form accurate expectations. Either way, continued disappointments may be a sign that a company is not as straightforward with the public as it should be.

Unusual Share Structure -- Be aware of companies that have multiple classes of shares, or shares that convey exceptional voting rights. Insiders often use these techniques to maintain control even if they only hold a minority position in the stock.

Alternatively, such shares may be evidence of what's known as a takeover defense -- a way for management to block hostile takeover attempts from other companies or private investors. Often, hostile takeovers lead to strong share price gains for existing shareholders. As such, takeover defenses generally do not create shareholder value. Instead, they merely provide added job security for top managers.

Shareholder-Friendly Firms

With these points in mind, Tracy and his team recently scoured the investment landscape in search of shareholder-friendly companies. Below, you'll find a few that fit the bill.

Best Buy (BBY) Best Buy owns and operates the largest chain of retail electronics stores in the U.S. with nearly 1,000 locations. The firm competes with other dedicated electronics retailers in the U.S., as well as with general retailers like Wal-Mart and Target. Nonetheless, BBY has succeeded in differentiating itself from the competition by offering a wide selection of electronics and large stores totally dedicated to all things electronic. Customers prefer BBY's large, airy stores to competitors, and general retailers like Wal-Mart just can't compete with Best Buy's selection when it comes to electronics. In addition, BBY is known for its staff -- the company hires well-trained personnel as well as several computer experts at each store to assist customers with electronics questions. Corporate insiders own 16.5% of Best Buy's outstanding shares, with roughly 16% of those shares owned by founder and chairman Richard Schulze. CEO Robert Willett earned a little over $1.2 million last year, but that doesn't appear out of line for a company with nearly $32 billion in annual revenues. No net debt, a ROE of nearly 25%, and a meaningful share buyback plan are all additional signs of a shareholder-friendly management team.

Automatic Data Processing (ADP) ADP is probably best known for offering payroll processing and information systems to employers. However, the company also offers a variety of other business services, including transaction processing and insurance claims processing. Handling payroll and accounting services for businesses is a very attractive market. ADP's systems handle all tax considerations, wire funds or issue checks, and track employee information. Once a company signs up for ADP's services, it would be time-consuming and expensive to switch providers. As a result, payroll processing is considered a "sticky" business. Moreover, ADP has an opportunity to sell additional services to its enormous base of existing customers. ADP's management team owns just 1.5% of the firm's outstanding share count. Therefore, on the surface, it might not seem as though management's interest are aligned with shareholders' interests. However, when you take a look at the firm's top insider holdings, the picture looks much brighter. For example, Automatic Data's CEO earned a touch over $1.43 million last year and owns nearly $20 million worth of stock -- a significant financial investment. Moreover, ADP has tied its compensation plan to financial performance. With no debt and a return on equity of 19%, ADP has a proven track record of generating shareholder value.

Other Shareholder-Friendly Firms include:

Donaldson (DCI) is a worldwide manufacturer of air cleaners, liquid filters and exhaust products and accessories for heavy duty mobile equipment; in-plant air cleaning systems; air intake systems and exhaust products for industrial gas turbines; and specialized filters for diverse applications. The Company has one industry segment which consists of the design, manufacture and sale of products to filter air, sound and liquid.

Gap (GPS) is a global specialty retailer which operates stores selling casual apparel, personal care and other accessories for men, women and children under the Gap, Banana Republic and Old Navy brands. The company designs virtually all of its products, which in turn are manufactured by independent sources, and sells them under its brand names.

General Parts (GPC) is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The company conducts its business throughout the United States, Mexico, and Canada.

Content Courtesy: Zacks Investment Research

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