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Thursday, April 19, 2007

X - United States Steel Corp - topped the Street’s earnings estimate in four straight quarters by an average margin of 20.8%

United States Steel Corporation (X) exceeded analysts’ earnings expectations in four straight quarters by an average margin of 20.8%. Consensus earnings estimates for both this year and next are up over the past 30 days. On Mar 29, X announced that it will acquire Lone Star Technologies, Inc., making it North America's largest producer of tubular steel. X has a price-to-book ratio of 2.9 and a current dividend yield of 0.76%.

Full Analysis

United States Steel Corporation manufactures a wide variety of steel sheet, tubular and tin products; coke, and taconite pellets; and has a worldwide annual raw steel capability of 26.8 million net tons.

X topped the Street’s earnings estimate in four straight quarters by an average margin of 20.8%. Furthermore, the company met or beat the consensus estimate in 14 out of the past 16 quarters. During this period of time, X surprised to the upside by a double-digit percentage on nine occasions.

On Jan 29, X reported fourth-quarter profits of $2.44 per share. With analysts calling for $2.27, the company surpassed expectations by 7.5%. Compared to earnings of $1.14 in the prior-year period, the result equated to a 114.0% year-over-year improvement. Revenues jumped 8.7% to $3.77 billion from $3.47 billion in the fourth quarter of 2005.

For the entire year, profits came in at $1.37 billion, or $11.18 per share, compared to $910 million, or $7.00 per share, in 2005. Revenues rose to $15.72 billion from $14.04 billion. X is scheduled to report its first-quarter results on Apr 24.

Chairman and CEO John P. Surma stated, "Our performance in 2006 resulted in another outstanding year, with record sales, operating income and net earnings. All in all, 2006 will go down as one of the best years in our long history."

While the consensus earnings estimate has held steady for this quarter over the past 30 days, profit forecasts for next quarter are up 13 cents. Estimates for this year and next experienced 22-cent and 44-cent jumps, respectively, over the same period of time. Four analysts upped their estimates for this year while six followed suit for next year. Earnings per share are projected to grow 10% over the next 3-5 years, with the industry expected to grow by 8%.

On Mar 29, X announced that it will acquire Lone Star Technologies, Inc., a manufacturer of welded oilfield tubular goods, for $67.50 per share in cash. The deal is expected to close in the second or third quarter of 2007. The transaction will make X North America's largest producer of tubular steel.

X is currently trading at a valuation of 11.3x current fiscal-year estimated earnings and at 12.3x 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 14.3x next fiscal-year estimated earnings. The company has a price-to-book ratio of 2.9 and a current dividend yield of 0.76%. It has a return on equity of 32% versus 19% for the industry average.

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ICFI - ICF International, Inc - Consensus estimates for this quarter and next are up 76.0% and 66.7%

Consensus earnings estimates have shot upward for ICF International, Inc. (ICFI) over the past 30 days. Earnings per share are projected to grow 15% over the next 3-5 years. The company announced two strategic acquisitions in January. This Zacks #1 Rank stock has a price-to-book ratio of 2.7, compared to 4.4 for the market. Its PEG ratio currently resides at 0.96.

Full Analysis

ICF International, Inc. and its subsidiaries provide management, technology and policy consulting and implementation services primarily to government, commercial and international clients. The company’s services primarily address energy; environment and infrastructure; health, human services, and social programs; and homeland security and defense markets.

On Mar 20, ICFI reported fourth-quarter profits of $9.2 million, or 65 cents per share, compared with a prior-year loss of $1 million, or 11 cents per share. The result absolutely crushed the consensus estimate of 31 cents by 109.7%. Revenues soared to $113.9 million from $51.8 million.

For the full year, profits came in at $11.9 million, or $1.10 per share, from $2 million, or 21 cents per share. Revenues rose to $331.3 million from $177.2 million. At the end of the fourth quarter, ICFI had a total backlog of $969 million versus a total backlog at the end of the third quarter of $317 million.

Chairman and CEO Sudhakar Kesavan stated, "ICF entered 2007 with a solid backlog, and we are continuing to build our service capabilities across the full life cycle of client needs. Because of our recognized expertise, we see significant opportunities for growth across our markets, especially in homeland security, climate change, and energy. We also will continue to seek strategic acquisitions. As a result, we expect that 2007 will be a year of solid growth for ICF."

Analysts are also optimistic about ICFI’s future prospects. Consensus estimates for this quarter and next are up 76.0% and 66.7%, respectively, over the past 30 days. Both of the covering analysts revised their estimates upward. Profit forecasts for this year and next have risen 39.6% and 21.9%, respectively, over the same period of time. Two analysts submitted upward revisions for this year, while one analyst followed suit for next year. Earnings per share are projected to grow 15% over the next 3-5 years.

The company announced two acquisitions in January. On Jan 10, ICFI stated it will purchase Energy and Environmental Analysis, Inc., a 27-person consulting firm that specializes in energy market analyses, modeling, transportation and energy technology, and environmental advisory services. On Jan 23, the company announced the acquisition of Advanced Performance Consulting Group, a 29-person firm specializing in assisting federal agencies to improve business performance during times of increasing budget pressures, regulatory compliance requirements and technology-driven change.

ICFI is currently trading at a valuation of 14.4x current fiscal-year estimated earnings and at 13.3x next fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 15.9x current fiscal-year estimated earnings and at 14.4x next fiscal-year estimated earnings. The company has a price-to-book ratio of 2.7, compared to 4.4 for the market. Its PEG ratio currently resides at 0.96.

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CS - Credit Suisse Group - company increased its annual dividend by 12%

Credit Suisse Group (CS) reported impressive fourth-quarter and full-year 2006 results in mid-February. Management has returned value to shareholders through both dividend payments and share buybacks. The company is currently yielding 1.4%. CS has a price-to-book ratio of 2.6, compared to 4.4 for the market and 3.1 for the industry. Its PEG ratio currently resides at 0.65.

Full Analysis

Credit Suisse Group, founded in 1856, is the second-largest global financial services company in Switzerland behind rival UBS AG (UBS). CS offers a diverse range of banking and insurance products, life and pension solutions, and related financial advisory services to its international client base in over 50 countries.

On Feb 15, CS reported fourth-quarter net profits of 4.67 billion Swiss francs (US $3.75 billion), compared with 1.1 billion francs a year ago. Net revenues soared 42.7% to 10.8 billion francs (US $8.68 billion) from 7.57 billion francs a year earlier. The company stated that revenue from trading more than doubled, while fees and commissions jumped 25%.

For the entire year, profits soared to 11.38 billion francs (US $9.15 billion) from 5.85 billion francs in 2005. Total assets under management as of Dec 31, 2006 were 1,485.1 billion francs, versus 1,441.3 billion francs at Sep 30, 2006 and 1,319.4 billion francs at the end of 2005. CS is scheduled to release its first-quarter results on May 2.

The consensus estimate for this year currently resides at $6.18. Compared to the consensus of 30 days prior, it has jumped 10 cents. One of the three covering analysts upped his profit forecast. Earnings per share are projected to grow 19% over the next 3-5 years. The industry is expected to grow at a 13% clip.

Management has returned value to shareholders through both dividend payments and share buybacks. The company increased its annual dividend by 12% to 2.24 francs (US $1.79). CS has a current dividend yield of 1.4% and a five-year average dividend yield of 1.6%. The Board recently announced an eight billion-franc share repurchase program to replace the six billion-franc program it had completed.

CS is currently trading at a valuation of 12.1x current fiscal-year estimated earnings and at 10.5x next fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 15.9x current fiscal-year estimated earnings and at 14.5x next fiscal-year estimated earnings. The company has a price-to-book ratio of 2.6, compared to 4.4 for the market and 3.1 for the industry. Its PEG ratio currently resides at 0.65.

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MA - MasterCard Inc - Over the past three quarters, MA’s average margin of surprise was 55.0%

MasterCard Incorporated (MA) topped analysts’ earnings expectations over the past three quarters by an average margin of 55%. Consensus estimates have jumped over the past two months. On Feb 9, the Board of Directors declared a 66.7% boost in its quarterly cash dividend to 15 cents per share from nine cents. MA’s return on equity tops that of the industry average—23% compared to 16%.

Full Analysis

MasterCard Incorporated, along with its subsidiaries, is a global payment solutions company that provides a variety of services in support of the credit, debit and related payment programs of nearly 25,000 financial institutions worldwide.

Since MA became a publicly-traded company on May 25, 2006, the company has beat analysts’ earnings expectations every quarter. Over the past three quarters, MA’s average margin of surprise was 55.0%. Before going public, the company spent four decades as a private entity.

On Feb 9, MA posted fourth-quarter earnings per share of 31 cents, crushing the Street’s estimate of 14 cents by 121.4%. Revenues increased 17.2% to $839 million from $716 million a year earlier. MA processed $532 billion in global transactions, which amounted to a 14% jump from the prior-year period. The company issued 817 million MasterCard-branded cards as of Dec 31, up 12% from the year-ago period.

Consensus earnings estimates for this quarter and next are up three cents and two cents, respectively, over the past 60 days. Profit forecasts for this year and next jumped 11 cents and 16 cents, respectively, over the past two months. Earnings per share are projected to grow 16.3% over the next 3-5 years. MA is scheduled to release its first-quarter results on May 2.

In addition to releasing impressive fourth-quarter results, MA declared a 66.7% boost in its quarterly cash dividend to 15 cents per share from nine cents. The dividend will be paid on May 10 to stockholders of record as of Apr 9. Chief Financial Officer Chris A. McWilton stated, "We are pleased that the success of our business and the strength of our capital position has allowed us to increase our dividend, further demonstrating our commitment to drive shareholder value." MA has a current dividend yield of 0.55%.

On Apr 10, the Board approved a $500-million Class A share repurchase program. MA will also convert 13.4 million Class B shares into Class A shares on a 1-for-1 basis.

MA’s return on equity, a common measure of profitability, tops that of the industry average—23% compared to 16%.

MA 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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IEX - IDEX Corp - topped analysts’ earnings expectations in 12 out of the past 15 quarters

IDEX Corporation (IEX) exceeded analysts’ earnings expectations in 12 out of the past 15 quarters. On Apr 4, the Board of Directors declared a 20% boost in its quarterly cash dividend to 18 cents per share, marking its 50th consecutive quarterly dividend payment. IEX is currently yielding 1.4%. The company’s return on equity betters that of the industry average—14% compared to 9%.

Full Analysis

IDEX Corporation is an applied solutions company specializing in fluid and metering technologies, health and science technologies, dispensing equipment, and fire, safety and other diversified products built to its customers' exacting specifications. The company’s products are sold in niche markets to a wide range of industries throughout the world.

IEX topped analysts’ earnings expectations in 12 out of the past 15 quarters. In the three quarters in which the company failed to beat the Street, it managed to match estimates. Earnings per share grew 25.0% over the past five years.

On Jan 30, IEX posted fourth-quarter earnings per share of 67 cents, which exceeded the consensus estimate by three cents. Compared to profits of 54 cents in the prior-year period, the result marked a 24.1% year-over-year improvement. Revenues increased 19.5% to $302.1 million from $252.9 million in the year-ago period.

For the entire year, the company reported profits of $146.7 million, or $2.72 per share, compared to $109.8 million, or $2.08 per share, in 2005. Revenues jumped 14% to $1.15 billion. IEX increased revenues for the past nine years and expanded gross margins and grew profits for five years running. The company is scheduled to release its first-quarter 2007 results on Apr 19.

On Apr 4, the Board of Directors declared a 20% boost in its quarterly cash dividend to 18 cents per share. The dividend represents IEX's 50th consecutive regular quarterly cash dividend payment and is payable on Apr 30 to shareholders of record as of Apr 16. The company is currently yielding 1.4%.

A 3-for-2 stock split was also recently announced. On May 21, shareholders will receive one additional share for every two owned as of May 7. This is the company’s fourth split of its common stock since its initial public offering in 1989. The aforementioned dividend payment will turn out to be 12 cents per post-split share.

Earnings per share are projected to grow 15% over the next 3-5 years. The company’s return on equity, a common measure of profitability, betters that of the industry average—14% compared to 9%.

IEX 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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AVP - Avon Products, Inc - One analyst upped his estimate over the past 30 days

Avon Products, Inc. (AVP), currently in the midst of a turnaround plan, continues to buy back shares and pay dividends. In fact, on Feb 1, the Board of Directors declared a 5.7% increase in its regular quarterly dividend to 18.5 cents per common share. AVP has a current dividend yield of 1.9% and a five-year average dividend yield of 1.7%.

Full Analysis

Avon Products, Inc. is a global manufacturer and marketer of beauty and related products. The company’s products fall into three product categories: Beauty, which consists of cosmetics, fragrances, skin care and toiletries; Beauty Plus, which consists of fashion jewelry, watches, apparel and accessories, and Beyond Beauty, which consists of home products and gift and decorative products.

On Feb 6, AVP posted fourth-quarter profits $184.1 million, or 41 cents per share. The result topped the consensus earnings estimate by two cents. AVP has now beaten analysts’ earnings expectations in 13 out of the past 16 quarters. Revenues jumped 9.2% to $2.62 billion from nearly $2.4 billion in the prior-year period. The company is scheduled to release its first-quarter results on May 1.

Chairman and CEO Andrea Jung stated, "With 9% revenue growth in the fourth quarter, we continue to feel good about the progress we are making against our turnaround plan. Boosted by this strong quarterly performance, full-year revenue finished ahead of our expectations. The investments we are making in our business are clearly starting to deliver results."

AVP's turnaround initiative to improve brand competitiveness included a 95% boost in fourth-quarter advertising to $89 million. The increase supported new product introductions as well as Avon China's direct-selling launch.

The consensus earnings estimate for this quarter currently resides at 29 cents. One analyst upped his estimate over the past 30 days. Profit forecasts for next quarter sit at 39 cents and also reflect an upward revision by one analyst over the past month. Earnings per share are projected to grow 11.3% over the next 3-5 years.

Although the company is in the midst of a turnaround program, it was able to produce $796 million in cash flow from operating activities. AVP repurchased $355 million of its own shares during the past year. Moreover, on Feb 1, the Board of Directors declared a 5.7% increase in its regular quarterly dividend to 18.5 cents per common share from 17.5 cents. AVP has a current dividend yield of 1.9% and a five-year average dividend yield of 1.7%.

AVP’s return on equity dwarfs that of the industry average—67% compared to 19%.

AVP 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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MIDD - The Middleby Corp - In early-March, the company reported excellent earnings

The company has met or exceeded earnings estimates in 13 consecutive quarters, with 12 of those periods registering positive surprises. One analyst raised his numbers for this year. Over the past 60 days, this year's earnings estimates have increased 22 cents to $6.02 per share. The stock is trading at 20x next year's estimates compared to its long-term growth rate of 15%.

Full Analysis

The Middleby Corporation (MIDD), through its subsidiaries, engages in the design, manufacture, marketing, distribution, and service of a line of cooking equipment and related products primarily in the United States. The company operates in three segments: Commercial Foodservice Equipment, Industrial Foodservice Equipment, and International Distribution.

Middleby markets its products and services through sales personnel, international marketing divisions, and subsidiaries, as well as a network of independent dealers, distributors, consultants, sales representatives, and agents.

In early-March, the company reported excellent earnings. The company said it earned $11.1 million, or $1.34 per share, on $98.3 million in sales. Analysts predicted earnings of $1.19 per share for the quarter. New acquisitions were responsible for most of the gains. Furthermore, operating margins improved as Middleby worked to integrate the Alkar RapidPak business, which it purchased in December 2005.

Net sales rose 27.8% in the fourth quarter. The net sales increase in the fourth quarter reflects the impact of acquisitions, which accounted for 14.5% of sales growth for the quarter. Excluding acquisitions, sales rose 13.3% in the fourth quarter, resulting from new product sales and continued growth in restaurant chain business.

Selim A. Bassoul Chairman and Chief Executive Officer said, "We were pleased with the results of the fourth quarter of 2006 and the full year. We realized sales and earnings growth at each of our brands for the quarter and the year. We introduced numerous new and innovative products which contributed to this growth. As we move into 2007, we remain excited about the pipeline of new products focused on speed of cooking, energy savings, and automation."

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BARE - Bare Escentuals, Inc - received an upgrade from Goldman Sachs to Buy

BARE is a small company that is enjoying huge momentum. The company reported a huge quarter in late-February and raised guidance. Earnings estimates have been on the rise as well. Over the past week, this year's numbers have risen five cents to 91 cents per share. Next year's estimates have risen a dime over that time period.

Full Analysis

Bare Escentuals, Inc. (BARE), together with its subsidiaries, engages in the development, marketing, and sale of cosmetics, skin care, and body care products. It offers a range of eye and face products, such as blushes, face colors, liner shadows, eyeshadows, and glimmers, as well as foundation products under i.d. bareMinerals brand; cosmetics and accessories, including finishing powders, lipsticks, lip-glosses, lip liners, mascaras, application tools, and brushes under i.d. brand; and mineral-based nighttime skin revival treatment under the RareMinerals brand.

The company also provides various formulas for bath, body, and face under Bare Escentuals brand; and a range of professional skin care products under the md formulations brand. Bare Escentuals sells its products primarily through infomercials, home shopping television, specialty beauty retailers, company-owned boutiques, spas and salons, and online shopping. It has operations in the United States, Western Europe, Asia, and Australia.

On April 12, the company received an upgrade from Goldman Sachs to Buy from Neutral, saying it believes high valuation is supported by the abundance of long-term growth opportunities including U.S. market-share gains, international expansion and skincare. In addition the broker told clients that management has taken a measured approach with respect to new initiatives and noted that guidance excludes any contribution.

The company posted outstanding fourth-quarter earnings on a surge in revenues. Sales grew almost 40%, while net income more than tripled. The company, which went public in September, reported a quarterly profit of $16.3 million, or 18 cents per share calculated on 92 million shares outstanding. In the fourth quarter a year, the company earned $4.8 million, or 7 cents per share on 72 million shares. Analysts expect 13 cents per share.

BARE also raised its 2007 profit guidance after reporting strong fourth-quarter earnings. The company said it now expects 2007 earnings between 84 cents and 89 cents per share on about 92.6 million shares outstanding, an increase of 3 cents per share over its previous guidance.

"We are extremely pleased with our performance for the fourth quarter and fiscal 2006," said Leslie Blodgett, Chief Executive Officer. "The Bare Escentuals brand continues to flourish due to the amazing support of our customers, partners, and employees. We plan to continue this momentum into 2007 with the launch of innovative new products and the expansion of our distribution channels both here and abroad. In addition, we'll be launching a nationwide tour to connect directly with our customers in order to ensure we're doing everything we can to exceed their expectations."

The company has only been public for several months, but business is clearly brisk at Bare Escentuals. The valuation is a bit high, but justified due to its strong earnings growth.

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LAZ - Lazard, Ltd - an exceptional first full year as a publicly traded firm

The company has exceeded earnings estimates in five out of the past six quarters. Earnings estimates for this year have jumped 17 cents to $2.80 per share over the past 60 days. Next year's numbers have risen an impressive 58 cents to $3.18 per share. With the Mergers & Acquisition picture still looking bright, LAZ's earnings should continue to grow nicely.

Full Analysis

Lazard, Ltd. (LAZ), through its subsidiaries, operates as a financial advisory and asset management firm worldwide. The company operates primarily in two segments, Financial Advisory and Asset Management. The Financial Advisory segment offers a range of services regarding mergers and acquisitions, restructurings, and various other corporate finance matters, which include evaluating potential acquisition targets, providing valuation analyses, evaluating and proposing financial and strategic alternatives, rendering opinions, assisting in the determination of an appropriate capital structure, and evaluating and recommending financial and strategic alternatives.

The company reported fourth-quarter earnings that easily exceeded analyst expectations. Net income on a fully exchanged basis for the fourth quarter of 2006 increased by 50% to $85.8 million, or $0.78 per common share (diluted), from $57.3 million, or $0.57 per common share (diluted) for the fourth quarter of 2005. Analysts only expected 62 cents per share.

Operating income increased by 49% to $115.2 million for the fourth quarter of 2006, from $77.1 million for the fourth quarter of 2005. Operating revenue for the fourth quarter of 2006 increased by 27% to $491.5 million, from $387.7 million for the fourth quarter of 2005.

"Lazard had an exceptional first full year as a publicly traded firm and these results demonstrate the continued effectiveness of our simple business model. We are particularly pleased to have successfully implemented our three-year plan in Asset Management," said Bruce Wasserstein, Chairman and Chief Executive Officer of Lazard Ltd. "We are a premium financial services firm that is committed to excellence, intellectual rigor, integrity and creativity for our clients on a global scale."

Lazard is also becoming a player with its asset-management business. For example, in 2006, segment revenues increased 18% to $548 million, and net inflows of assets were $2.8 billion. In all, the firm has about $110 billion under management.

The company has exceeded earnings estimates in five out of the past six quarters. Earnings estimates for this year have jumped 17 cents to $2.80 per share over the past 60 days. Next year's numbers have risen an impressive 58 cents to $3.18 per share. With the Mergers & Acquisition picture still looking bright, LAZ's earnings should continue to grow nicely.

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