Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week’s analysis include Hershey (NYSE: HSY), Steel Dynamics (Nasdaq: STLD), Tootsie Roll Industries (NYSE: TR), U.S. Steel (NYSE: X) and WM Wrigley (NYSE: WWY). To see the Zacks Industry Rank and the trend in earnings estimates revisions for all 208 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.
Food-Confectionery is near the top of the Zacks Industry Rank List. This small group is comprised of three Zacks #2 Rank (“buy”) stocks: Hershey (NYSE: HSY), Tootsie Roll Industries (NYSE: TR) and WM Wrigley (NYSE: WWY).
Rising commodity prices, particularly sugar and corn, are a concern for all three companies. However, the candy companies are attempting to pass along the higher costs to consumers. For instance, Wrigley recently announced its intention to raise prices by 10% on most products. (WWY and HSY are also engaging in cost-cutting strategies to improve their margins.)
Brokerage analysts seem to believe that the companies will have some success in managing the higher commodity costs. Full-year profit projections for HSY are up two cents over the 30 days to $2.55 per share. The sole analyst covering TR has raised his full-year forecast by six cents over the past 60 days to $1.29 per share. Two of the 14 analysts covering WWY have adjusted their projections within the past 30 days, causing the consensus estimate to rise by a penny to $2.21 per share.
Steel Dynamics (Nasdaq: STLD) recently raised its first-quarter guidance. The company now expects to earn between 94 and 98 cents per share this quarter versus its previous forecast of 85 to 90 cents per share.
Steel Dynamics’ CEO, Keith Busse, credited “decreased import activity and lower inventories at steel service centers” for improving market conditions. Inventory levels had been a concern for the industry because of higher Chinese production and weak demand by automakers. Brokerage analysts raised their forecasts on STLD following the release of the new forecast, sending the consensus first-quarter earnings estimate up by a cumulative nine cents to 96 cents per share. Full-year estimates are 12 cents higher at $3.82 per share.
There have been some signs of a spillover effect. For example, one analyst raised his second-quarter profit forecast on U.S. Steel (NYSE: X) within the past week, causing the consensus estimate to move seven cents higher to $2.49 per share. In addition, three of the 14 covering brokerage analysts have adjusted their full-year projections. The new full-year earnings estimate of $9.28 per share is 16 cents higher than a week ago. (The first-quarter consensus estimate is unchanged.)
Both STLD and X are Zacks #2 Rank stocks and are classified in Steel-Producers. This group also contains one Zacks #1 Rank (“strong buy”) stock and three other Zacks #2 Rank stocks.
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.
(a)The Zacks Rank is assigned to companies with earnings estimates made available by brokerage analysts. The Zacks’ database contains earnings estimates for approximately 4400 companies.
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 +31.8%. 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 143.6% annually (+4.8% vs. +11.8%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
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