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Zacks Industry Rank Analysis Highlights: Agrium, Bebe Stores, Bunge, Hovnanian and Ross Stores

Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this weeks analysis includes Agrium (NYSE: AGU), Bebe Stores (Nasdaq: BEBE), Bunge (NYSE: BG), Hovnanian (NYSE: HOV) and Ross Stores (Nasdaq ROST). To see the Zacks Industry Rank and the trend in earnings estimates revisions for more than 200 industry groups, visit http://at.zacks.com/?id=3154.

Zacks Industry Rank Analysis is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.

A significant drop in the number of earnings estimate revisions has started to occur. Based on a four week rolling period, 9,587 estimates were revised as of last night versus 13,079 a week ago. To put these numbers in perspective, the peak was reached two weeks ago at 13,748. The last lull was set just before the start of third-quarter earnings season at about 3,500.

The number of estimate revisions tends to rise and fall with the number of earnings reports being released. As more companies provide up-to-date earnings information, brokerage analysts are more likely to revise their forecasts. Likewise, during periods when companies are relatively quiet, brokerage analysts are less likely to revise their forecasts.

During the past few quarters, the number of mid-quarter estimate revisions has dropped. This occurrence may be partially to blame on the uncertain pace of economic growth. CFOs may feel less confident about raising their guidance and brokerage analysts may be less likely to adjust their forecasts in the absence of company news or other data that would suggest profits could be better than anticipated.

Along with the drop in the number of estimates, the Zacks Revisions Ratio is likely to fall below 1.0. The revisions ratio divides the number of positive revisions (estimates being revised upwards) by the number of negative revisions (estimates being revised downward). Over the past four weeks, there have been 4,792 positive revisions and 4,795 negative revisions for the current fiscal year, which equates to a Zacks Revisions Ratio of 1.0. Obviously, numbers above 1.0 are preferred, but a slippage to .90 (or slightly lower) in September would not be cause for alarm.

While the revisions ratio is stable for the overall Zacks Rank universe, there are pockets of weakness. Many pockets are in areas that are not unexpected, such as Building-Residential/Commercial. This group has a Zacks Revisions Ratio of just 0.14, a reflection of the ongoing slump within the industry. What is notable that is despite last months improvement in new home sales, brokerage analysts are not only cutting their forecasts for this year but are also cutting their fiscal 2008 profit projections for several homebuilders including Hovnanian (NYSE: HOV).

The extent to which the problems with the housing market and the related issues with mortgages are curtailing consumer spending is not fully known. The summer has not been kind to clothing retailers, with Retail-Apparel/Shoe possessing a Zacks Revision ratio of just 0.28. As I stated last week, economic factors, the shifting of tax-free days in Texas and Florida to August, a later start to the school year in certain districts and merchandising mistakes all played a role. Just within the past seven days, brokerage analysts have lowered their full-year earnings forecasts several retailers including Bebe Stores (Nasdaq: BEBE) and Ross Stores (Nasdaq ROST).

So where is the strength? Where it has been throughout the calendar year: down on the farm. Fertilizers has a Zacks Revision Ratio of 14.0 with full-year estimates recently raised on several companies including Agrium (NYSE: AGU). Agricultural Operations has a Zacks Revisions Ratio of 7.0 with full-year estimates being raised on Bunge (NYSE: BG).

The interactive Zacks Industry Rank List allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. See the list at http://at.zacks.com/?id=3208.

About Zacks Industry Rank and the Zacks Rank

Zacks Industry Rank is calculated by averaging the Zacks Rank for all covered companies within a given industry. The Zacks Rank is assigned to approximately 4400 stocks and ranges from #1 (Strong Buy) to #5 (Strong Sell). Both the Zacks Industry Rank and the Zacks Rank are quantitative indicators designed to cover periods of 1-3 months.

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +32%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 129% annually (+5 % vs. +12%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2564.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3:1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros by going to http://at.zacks.com/?id=2565.

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Zacks Rank performance is the total return (price changes + dividends) of equal weighted portfolios, consisting of those stocks with the indicated Zacks Rank, assuming zero transaction costs. These returns are not the result of a backtest; these are actual returns since 1988. The stocks in the Zacks Rank portfolios were available to Zacks clients before the beginning of each month (monthly rebalancing). Performance results from 1988 through June 2007 are based on a subset of all Zacks Rank stocks that excludes stocks covered by only one analyst and ADRs.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contacts:

Zacks.com
Charles Rotblut, CFA, 312-265-9352
pr@zacks.com
www.Zacks.com

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