Zacks Industry Rank Analysis Highlights: Cameron, Home Depot, Lowe's, McDermott and National Oilwell

Zacks Industry Rank Analysis Highlights: Cameron, Home Depot, Lowe's, McDermott and National Oilwell

CHICAGO--(BUSINESS WIRE)--

Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis include Cameron (NYSE: CAM), Home Depot (NYSE: HD), Lowe's (NYSE: LOW), McDermott (NYSE: MDR) and National Oilwell (NYSE: NOV). 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.

As many of you are already aware, Home Depot (NYSE: HD) reported disappointing first-quarter results on Tuesday. The home improvement retailer earned 53 cents per share, six cents less than brokerage analysts had forecast and 17 cents below year-ago profits. Same-store sales dropped 7.6%. The earnings miss was not completely unexpected as four of the 16 covering brokerage analysts had cut their first-quarter and full-year forecasts during the seven day period leading up to the report. (Two brokerage analysts also lowered their first-quarter forecasts on Lowe's (NYSE: LOW).

Changing weather conditions in February and March played a role, though there are company-specific issues at HD that are not helping profits either. Plus, there is the competitive pressure being placed on the Home Depot by Lowe's.

At the macro level, the housing slump is major issue. A lower number of home sales mean fewer trips to the home improvement store for things. Flat-to-falling home prices make it less desirable to pursue home improvement projects. Tightening in credit standards are also likely playing a role to the extent that they make home equity credit loans more expensive and/or harder to get. Combined, these factors explain why Building Product-Retail/Wholesale has three Zacks #4 Rank ("sell") stocks, including HD and LOW, and one Zacks #5 Rank ("strong sell") stock.

Moving on...

Last week, McDermott (NYSE: MDR) exceeded profit forecasts by 62 cents with earnings of $1.37 per share. Revenues more than doubled to $1,36 billion for the energy engineering and construction company, reflecting material impact of an acquisition plus good business conditions. Nearly all of the covering brokerage analysts raised their profit forecasts following the earnings reports, pushing the full-year consensus estimate up 86 cents to $4.08 per share.

McDermott's report follows several bullish earnings announcements from companies within Oil Field Machinery and Equipment. This group contains five Zacks #1 Rank stocks and four Zacks #2 Rank stocks. Oil's ability to stay at elevated prices is having a beneficial impact on this group as it boosts spending on both maintenance and exploration. Demand for offshore equipment was a particular source of strength with both National Oilwell (NYSE: NOV) and Cameron (NYSE: CAM) crediting strong demand for drilling products for boosting both their first-quarter profits and backlog. NOV and CAM are Zacks #1 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.

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 +31.9%. 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 132% annually (+5.1% vs. +11.9%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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(a) 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 September 2006 are based on a subset of all Zacks Rank stocks that excludes stocks covered by only one analyst and ADRs. Starting in October 2006 and going forward the performance numbers for the Zacks Rank is based upon the full universe of stocks which is more reflective of the list of stocks that customers will find on the Zacks websites. 2007 returns are for the period of Jan 1 - Mar 31, 2007.

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Source: Zacks.com