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Thursday, April 12, 2007

EMN - Eastman Chemical Co - Board of Directors recently announced a $300-milllion share repurchase program

Eastman Chemical Company (EMN) exceeded analysts’ earnings expectations for the past four quarters and in 11 out of the past 13. Consensus earnings estimates have been on the rise for this Zacks #1 Rank stock. The Board of Directors recently announced a $300-milllion share repurchase program and declared a 44-cent dividend. EMN is currently yielding 2.7%. The company has a price-to-book ratio of 2.6.

Full Analysis

Eastman Chemical Company engages in the manufacture and sale of various chemicals, plastics and fibers primarily in the United States. The company operates through five segments: Coatings, Adhesives, Specialty Polymers and Inks; Fibers; Performance Chemicals and Intermediates; Performance Polymers; and Specialty Plastics.

EMN exceeded analysts’ earnings expectations for the past four quarters by an average margin of 6.4%. Furthermore, the company topped the Street’s estimate in 11 out of the past 13 quarters.

On Jan 25, EMN reported fourth-quarter profits of $1.00 per share, beating expectations by 7.5%. Compared to earnings of 90 cents per share in the prior-year period, the result marked an 11.1% year-over-year improvement. Revenues jumped to $1.75 billion from $1.73 billion in the fourth quarter of last year.

For the full year, profits fell to $409 million, or $4.91 per share, from $557 million, or $6.81 per share. However, revenues increased to $7.45 billion from $7.06 billion. Chairman and CEO Brian Ferguson stated, "Our fourth-quarter and full-year 2006 results reflected continued strong performance from most areas of the company."

Analysts have been growing increasingly optimistic about the company’s future earnings prospects. Consensus estimates for both this quarter and next are up five cents and nine cents, respectively, over the past month. Three analysts upped their estimates for this quarter while two did so for next quarter. Profit forecasts for this year and next experienced 17-cent and 10-cent increases, respectively, over the same period of time. Three analysts upped their estimates for this year while two followed suit for next year.

On Feb 21, the Board of Directors announced the repurchase of up to $300 million of the company’s common stock. The buyback program replaces EMN's existing repurchase authorization, under which $288 million remained available. Also, the Board declared a quarterly cash dividend of 44 cents per share on Feb 20. EMN has a current dividend yield of 2.7%.

EMN 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 15.6x current fiscal-year estimated earnings. The company has a price-to-book ratio of 2.6, compared to 2.7 for the industry. Its return on equity easily surpasses that of the industry average—22% compared to 14%.

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MT - Arcelor Mittal - Consensus estimates for both this quarter and next are up

Consensus earnings estimates for Arcelor Mittal (MT) have been on the rise over the past two months. The company recently raised its offer for the shares it doesn't already own in Arcelor Brasil SA. MT’s $590-million share repurchase program recently kicked off and a 32.5-cent interim dividend was announced in early-February. This Zacks #1 Rank stock is currently trading at a valuation of 8.8x current fiscal-year estimated earnings and at 7.8x next fiscal-year estimated earnings.

Full Analysis

Arcelor Mittal is a global steel producer with an industrial presence in 27 countries across Europe, the Americas, Asia and Africa. The company has a balanced geographic diversity within all the key steel markets, both developing and developed. MT is the leader in all major global markets, including automotive, construction, household appliances and packaging, with leading R&D and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks.

On Feb 21, MT reported fourth-quarter earnings per share of $1.71. With analysts calling for $1.45, the company surprised by 17.9%. Compared to profits of 92 cents per share in the prior-year period, the result represented an 85.9% year-over-year improvement. Revenues climbed 5% to $23.2 billion.

For the entire year, profits slipped to $7.97 billion from $8.26 billion a year earlier. However, revenues rose 10% to $88.57 billion. The company cited that costs last year were higher than expected across the board as iron ore prices climbed by a fifth, the euro rose against the dollar and labor costs increased.

Consensus estimates for both this quarter and next are up three cents and 21 cents, respectively, over the past two months. Profit forecasts for this year and next experienced 17-cent and 67-cent increases, respectively, over the same period of time.

On Apr 6, Mittal Steel Co. upped its offer for the shares it doesn't already own in Arcelor Brasil SA. The new offer for Arcelor SA's Latin American steel units would add as much as $5.35 billion to the estimated $33 billion cost to acquire Arcelor. Mittal currently owns about 66% of the unit. The revised offer was made in an attempt to meet the demands of the Brazilian Securities Commission, or CVM.

When MT released its fourth-quarter results, the company pledged to return $2.4 billion to shareholders in the form of stock buybacks and dividend payments. An interim dividend of 32.5 cents per share was declared in early February, while the start of MT’s $590-million share repurchase program was announced on Apr 2. The company is currently yielding 1.0%.

MT is currently trading at a valuation of 8.8x current fiscal-year estimated earnings and at 7.8x next fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 15.7x current fiscal-year estimated earnings and at 14.2x next fiscal-year estimated earnings. The company has a price-to-book ratio of 3.6. Its return on equity more than triples that of the industry average—64% compared to 20%.

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RSO - Resource Capital Corp - Two of the four covering analysts upped their projections

Resource Capital Corp. (RSO), a Zacks #1 Rank stock, reported solid results for the fourth quarter of 2006 back in early March. Consensus earnings estimates for both this year and next have risen over the past 30 days. On Mar 20, the Board of Directors declared a quarterly cash dividend of 39 cents per common share of stock. RSO is currently yielding 9.74% and has a price-to-book ratio of only 1.2.

Full Analysis

Resource Capital Corp., together with its subsidiaries, operates as a specialty finance company in the United States. The company purchases and manages a diversified portfolio of real estate-related assets and commercial finance assets. The company elects to be treated as a real estimate investment trust (REIT) for federal income tax purposes. As a REIT, RSO is not subject to federal income tax if it distributes at least 90% of its taxable income to its shareholders.

On Mar 7, RSO reported fourth-quarter profits of $6.8 million, or 36 cents per share, compared to net income of $4.9 million, or 32 cents per share, for the fourth quarter of 2005. Net interest income increased 35.1% to $10.0 million from $7.4 million for the same period in 2005. RSO had a $1.8 billion portfolio of investments in commercial real estate, bank loans and asset-backed bonds as of Dec 31, 2006. The company is scheduled to report its first-quarter results on May 7.

Analysts’ optimism about RSO’s future earnings prospects has been on the rise. The consensus earnings estimate for this year currently sits at $1.80. This marks a seven-cent jump when compared to the consensus of a month earlier. Two of the four covering analysts upped their projections. Looking ahead to next year, the consensus estimate currently resides at $2.08. It represents a 12-cent increase over the same period of time. Upward revisions were submitted by all three covering analysts.

On Mar 20, the Board of Directors declared a quarterly cash dividend of 39 cents per common share of stock. The dividend will be paid on Apr 16 to shareholders of record as of Mar 30. On Dec 8, 2006, the Board declared a 38-cent quarterly dividend along with a special cash dividend of five cents per share. The special dividend was paid out due to gains from the termination of cash flow hedges. RSO has a current dividend yield of 9.74%.

RSO is currently trading at a valuation of 8.9x current fiscal-year estimated earnings and at 7.7x next fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 15.7x current fiscal-year estimated earnings and at 14.2x next fiscal-year estimated earnings. The company has a price-to-book ratio of only 1.2.

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VLO - Valero Energy Corp - surprised to the upside in 13 out of the past 16 quarters

Valero Energy Corporation (VLO), a Zacks #1 Rank stock, exceeded analysts’ earnings expectations in 13 out of the past 16 quarters, most recently by 10.4% in the fourth quarter of 2006. VLO increased revenues and expanded gross margins for the past eight years. On Jan 18, the Board of Directors approved a 50% boost in the company's regular quarterly cash dividend to 12 cents per share. VLO has a return on equity of 31%, compared to 8% for the industry average.

Full Analysis

Valero Energy Corporation is the largest refiner in North America, with a throughput capacity of approximately 3.3 million barrels per day. Its refining activities include refining operations, wholesale marketing, product supply and distribution, and transportation operations. VLO’s geographically diverse refining network stretches from Canada to the U.S. Gulf Coast and West Coast to the Caribbean.

When it comes to topping analysts’ earnings expectations, VLO has a fairly solid track record. The company surprised to the upside in 13 out of the past 16 quarters, most recently by 10.4% when it posted fourth-quarter profits of $1.59 per share. Both VLO’s profits and revenues, when compared to the fourth quarter of last year, were down. The prior-year period’s results reflected a rise in energy prices following Hurricanes Katrina and Rita, which hit the Gulf Coast in August and September. VLO is scheduled to report its first-quarter results on Apr 24.

For the entire year, VLO reported record profits of $5.5 billion, or $8.64 per share, up from $3.6 billion, or $6.10 per share, in 2005. Revenues jumped to $91.8 billion from $82.2 billion last year. VLO increased revenues and expanded gross margins for the past eight years. The company grew profits for four years running.

Analysts have been growing increasingly optimistic about the company’s future earnings prospects. Consensus estimates for both this quarter and next are up 15 cents and 11 cents, respectively, over the past month. Seven analysts upped their estimates for this quarter while two did so for next quarter. Profit forecasts for this year and next experienced 19-cent and 20-cent increases, respectively, over the same period of time. Eight analysts upped their estimates for this year while three followed suit for next year. Earnings per share are projected to grow 17% over the next 3-5 years, with the industry expected to grow at an 8% clip.

On Jan 18, the Board of Directors approved a 50% boost in the company's regular quarterly cash dividend to 12 cents per share from eight cents. VLO has a current dividend yield of 0.73% and a five-year average dividend yield of 0.75%. The Board also authorized a $2-billion common stock repurchase program on Oct 23, 2006. At the time of the announcement, the company bought back roughly 33 million shares at a cost of about $1.9 billion year-to-date.

VLO’s return on equity, a common measure of profitability, dwarfs that of the industry average—31% compared to 8%.

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LLL - L-3 Communications Holdings, Inc - company has beaten the Street’s estimate in 15 out of the past 16 quarters

L-3 Communications Holdings, Inc. (LLL) exceeded analysts’ earnings expectations in 15 out of the past 16 quarters. Citing anticipated defense spending in the U.S., LLL upped its earnings per share outlook for 2007. On Feb 6, the Board of Directors boosted its regular quarterly cash dividend by 33.3% to 25 cents per share. LLL is currently yielding 1.1% and its return on equity easily surpasses that of the industry average—12% compared to 2%.

Full Analysis

L-3 Communications Holdings, Inc. is a leading provider of Intelligence, Surveillance and Reconnaissance (ISR) systems, secure communications systems, aircraft modernization, training and government services. The company is a leading merchant supplier of a broad array of high technology products, including guidance and navigation, sensors, scanners, fuzes, data links, propulsion systems, simulators, avionics, electro optics, satellite communications, electrical power equipment, encryption, signal intelligence, antennas and microwave components.

LLL’s history of exceeding analysts’ earnings expectations should definitely catch the eyes of investors. The company has beaten the Street’s estimate in 15 out of the past 16 quarters.

On Jan 31, LLL reported fourth-quarter fiscal 2006 profits of $173.6 million, or $1.37 per share. Analysts were calling for $1.36 per share. Compared to the prior-year period, which resulted in profits of $151.4 million, or $1.24 per share, earnings climbed 10.5%. Revenues experienced a 17.2% jump to $3.4 billion from $2.9 billion in the fourth quarter of 2005.

For the entire year, profits came in at $526.1 million, or $4.22 per share, up from $508.5 million, or $4.20 per share, in 2005. Revenues soared 32.2% to $12.48 billion, compared to $9.44 billion in 2005. Funded backlog at Dec 31, 2006 increased 24.9% over year-end 2005.

Citing anticipated defense spending in the U.S., LLL upped its earnings per share outlook for 2007 to between $5.55 and $5.65. The company’s previous guidance called for profits between $5.45 and $5.55 per share. President and CEO Michael Strianese stated, "Our businesses are performing very well and we entered the new year with a record funded backlog. In addition, the current U.S. defense budget presents many opportunities for L-3's products and services."

Analysts’ optimism about LLL’s future earnings potential continues to grow as well. Over the past 30 days, five analysts raised their estimates for this year, pushing the consensus to $5.67. Two analysts upped their profit forecasts for next year, with the consensus currently sitting at $6.29. Earnings per share are projected to grow 12.8% over the next 3-5 years.

On Feb 6, the Board of Directors boosted its regular quarterly cash dividend by 33.3% to 25 cents per share from 18.75 cents. The company is currently yielding 1.1% and has a five-year average dividend yield of 0.46%. LLL’s return on equity dwarfs that of the industry average—12% compared to 2%.

LLL 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.

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LDG - Longs Drug Stores Corp - company has managed to surprise to the upside in 15 out of the past 16 quarters

Longs Drug Stores Corporation (LDG), which was first presented as a Growth and Income pick on Aug 31, has returned over 14%. The company beat analysts’ earnings expectations for 12 straight quarters and in 15 out of the past 16. Consensus earnings estimates are up over the past 30 days. This Zacks #1 Rank stock has a current dividend yield of 1.1%.

Full Analysis

Longs Drug Stores Corporation, through its subsidiaries, provides retail drug and pharmacy benefit services in the United States. The company is one of the most recognized retail drug store chains on the West Coast and in Hawaii. LDG operates 509 retail pharmacies and offers a wide assortment of merchandise focusing on health, wellness, beauty and convenience.

LDG, which was first presented as a Growth and Income pick on Aug 31, has returned over 14%. Thanks to its strong history of exceeding analysts’ earnings expectations, coupled with earnings estimates that continue to trend higher, the company is still a Zacks #1 Rank stock (strong buy).

LDG topped analysts’ earnings expectations over the past 12 quarters by an average margin of 12.7%. Furthermore, the company has managed to surprise to the upside in 15 out of the past 16 quarters.

On Feb 28, LDG beat the Street’s fourth-quarter earnings estimate by a solid 9.5% with profits of 81 cents per share. The company posted earnings per share of 65 cents in the prior-year period, representing a 24.6% year-over-year improvement. Revenues increased 8.1% to $1.34 billion from $1.24 billion in the fourth quarter of last year.

For the entire year, profits came in at $74.5 million, or $1.95 per share, up slightly from $73.9 million, or $1.93 per share, in 2005. Revenues experienced a 9.2% increase to $5.1 billion from $4.67 billion. LDG increased revenues for the past nine years and grew profits for the past three.

On Apr 5, LDG announced that March same-store sales, or sales from stores open at least a year, jumped 2.9%. Pharmacy same-store sales climbed 3.8%, while same-store sales of front-end operations rose 1.9%. Total revenues for the period advanced 4.9% to $452.7 million from $431.5 million.

Consensus estimates for this quarter and next quarter are each up a penny to 46 cents and 59 cents, respectively, over the past 30 days. Profit forecasts for this year have risen four cents to $2.37, while estimates for next year increased two cents to $2.74 over the past month. Earnings per share are projected to grow 17.5% over the next 3-5 years. On Feb 27, the Board of Directors declared a quarterly cash dividend of 14 cents per share. LDG is currently yielding 1.1%.

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SNHY - Sun Hydraulics Corp - very cheap at 14.2x next year's estimates - well below growth of 27%

In a relative rarity, the company pays a dividend of 1.50%. It is uncommon for a microcap company to pay a dividend of any sort. Earnings estimates have been rising, especially for next year. Over the past month, next year's estimates have jumped 25 cents to $1.90 per share. The stock is very cheap at 14.2x next year's estimates, well below the long-term growth rate of 27%.

Full Analysis

Sun Hydraulics Corporation (SNHY) designs and manufactures screw-in hydraulic cartridge valves and manifolds, which control force, speed, and motion as integral components in fluid power systems worldwide. Its products include screw-in cartridge valves; electro-hydraulic cartridges; manifolds, a solid block of metal that is machined to create threaded cavities and channels; and integrated packages, an assembly of cartridge valves into a custom designed manifold.

These products are used in construction, agricultural, and utility equipment, as well as in a range of industrial applications, such as machine tools and material handling equipment. Sun Hydraulics sells its products through subsidiaries and a network of independent fluid power distributors worldwide.

The company said in early-March its fourth-quarter profit rose 32% on a jump in revenue. Sun Hydraulics earned $3.8 million, or 35 cents per share, compared with $2.9 million, or 26 cents per share, for the same quarter in 2005. Analysts expected 32 cents per share. Revenue rose 25% to $35 million from $27.9 million in the year-ago period.

SNHY said the strong order trends have continued through January and February, and the company expects to post continued double-digit growth for the first quarter.

"Fourth quarter orders and shipments finished very strong and our 2006 financial results were even better than we had expected," said Allen Carlson, Sun's President and CEO. "While North America continued to hold up, we saw robust demand in Europe and Asia/Pacific. The strong order trends have continued through January and February and we anticipate first quarter 2007 results will continue to outpace the industry. We expect continued double digit growth in Q1 2007. This is exceptional given the strength of last year's first quarter."

In a relative rarity, the company pays a dividend of 1.50%. It is uncommon for a microcap company to pay a dividend of any sort. Earnings estimates have been rising, especially for next year. Over the past month, next year's estimates have jumped 25 cents to $1.90 per share. The stock is very cheap at 14.2x next year's estimates, well below the long-term growth rate of 27%.

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BRLI - Bio-Reference Laboratories, Inc - met or exceeded earnings estimates in four out of the past five quarters

BRLI has met or exceeded earnings estimates in four out of the past five quarters, with the most recent quarter registering a 16.7% surprise. Year-over-year growth has averaged over 40% over this time period. One of the two analysts that cover the stock raised his estimates for both this year and next. The stock is attractive at 21.2x next year's estimate of $1.22 per share.

Full Analysis

Bio-Reference Laboratories, Inc. (BRLI), together with its subsidiaries, provides clinical laboratory testing services primarily in the greater New York metropolitan area. It serves healthcare providers in the detection, diagnosis, evaluation, monitoring, and treatment of diseases.

The company offers chemical diagnostic tests, including blood and urine analysis; blood chemistry; hematology services; serology; radioimmuno analysis; toxicology comprising drug screening; pap smears; tissue pathology; and other tissue analysis. Bio-Reference Laboratories also provides clinical knowledge management services, and a Web-based connectivity portal solution for laboratories and physicians.

In early-March BRLI reported first-quarter net income of 14 cents per share, 16.7% above the consensus estimate. The Company had net revenues for the quarter of $53,722, an increase of 25% over the $42,918 of net revenues recorded in the first quarter fiscal year 2006. The net revenue increase was based on patient count of 836, a 15% increase over the prior year quarterly patient count of 730.

The Company noted that esoteric testing climbed to 43% of net revenues compared to 36% of net revenues in the first quarter of the prior year and 41% in Q4FY06, the prior sequential quarter. The solid growth in patient count was probably driven in large part by the disruptive changes taking place in the payer relationships in the New York Metropolitan area.

Marc D. Grodman M.D., President noted: "I am extremely encouraged by the results of our first quarter of the current fiscal year. A great deal of change has occurred in our industry since we reported our first quarter a year ago; a great deal has occurred in the last few months. While we have faced challenges during this time, we firmly believe that the strategy that we put into place many years ago has built a strong, resilient and vibrant company that is well-designed to deal with an evolving industry."

BRLI has met or exceeded earnings estimates in four out of the past five quarters, with the most recent quarter registering a 16.7% surprise. Year-over-year growth has averaged over 40% over this time period. One of the two analysts that cover the stock raised his estimates for both this year and next. The stock is attractive at 21.2x next year's estimate of $1.22 per share.

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ORCH - Orchid Cellmark, Inc - soared past analyst estimates in each of the past three quarters by 80% on average

The company has soared past analyst estimates in each of the past three quarters. The average surprise has been about 80% over that time. ORCH is still expected to lose money this year, but estimates have been increasing. Over the past 60 days, this year's numbers have risen seven cents to a loss of 10 cents per share. Keep in mind that only one analyst follows the company. The stock sports a strong growth rate of 30%.

Full Analysis

Orchid Cellmark, Inc. (ORCH) provides DNA testing services for human identity and agricultural applications in the United States and the United Kingdom. Its services generate genetic profile information by analyzing an organism?s unique genetic identity. The company provides DNA testing services for forensic, family relationship, and security applications in the human identity area to government agencies and private individuals; DNA testing services for selective trait breeding and traceability in agricultural applications for government agencies and commercial companies.

The company conducts forensic DNA testing primarily for government agencies; family relationship testing services to government agencies and private individuals; security DNA testing services to government agencies, commercial companies, and private individuals; and agricultural DNA testing services for government agencies and commercial companies.

In early-March, the company reported that it turned an unexpected profit of three cents per share, beating the consensus estimate by 10 cents. Total revenues were $14.9 million for the fourth quarter of 2006 compared to $14.7 million for the fourth quarter of 2005.

For the full year of 2006, revenues were $56.9 million compared to $61.6 million for the full year of 2005. The $229 thousand increase in revenues for the fourth quarter of 2006 as compared to the fourth quarter of 2005 was largely due to increased U.S. forensic casework and U.K. forensic revenue, partially offset by decreased U.S. paternity and license revenues.

Thomas Bologna, President and Chief Executive Officer of Orchid Cellmark, commented, "We believe our fourth quarter results further demonstrate that the actions we have taken over the last few quarters have had a positive impact on the company's performance. Our expectation moving forward is to further improve our business and operations with the goal of achieving sustainable profitability. We do intend to continue investing judiciously in our marketing and sales infrastructure and we are actively exploring acquisition opportunities."

Mr. Bologna concluded, "We believe that relative to just a year ago, we have made good progress in Orchid Cellmark's turnaround and we are now well positioned to build this business and capitalize on market opportunities. We have sized our facilities well, we have demonstrated that we can successfully pursue new U.K. forensic business on a direct basis, we have significantly improved the way we approach business in North America and we are in a better position to capitalize on strategic opportunities that we otherwise would not be able to pursue."

The company has soared past analyst estimates in each of the past three quarters. The average surprise has been about 80% over that time. ORCH is still expected to lose money this year, but estimates have been increasing. Over the past 60 days, this year's numbers have risen seven cents to a loss of 10 cents per share. Keep in mind that only one analyst follows the company. The stock sports a strong growth rate of 30%.

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