Zacks Industry Rank Analysis Highlights: Coca-Cola Enterprises, Coca-Cola Femsa, Home Depot, Lowe's and The Pepsi Bottling Group

Zacks Industry Rank Analysis Highlights: Coca-Cola Enterprises, Coca-Cola Femsa, Home Depot, Lowe's and The Pepsi Bottling Group

CHICAGO--(BUSINESS WIRE)--

Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis include Coca-Cola Enterprises (NYSE: CCE), Coca-Cola Femsa (NYSE: KOF), Home Depot (NYSE: HD), Lowe's (NYSE: LOW) and The Pepsi Bottling Group (NYSE: PBG). 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.

The Pepsi Bottling Group (NYSE: PBG) easily exceeded second-quarter expectations on Tuesday. The company earned 70 cents per share, seven cents above expectations. Notably, in the 30-day period prior to the earnings report, the quarterly consensus estimate had been revised upwards by five cents per share. Revenues rose 7%, reflecting higher per case revenues and a slight increase in physical case volume.

Cost of goods sold rose 6%. Higher concentrate and sweetener costs were the main culprits behind the increase. Reading behind the lines, corn syrup was more expensive. I bring this up because it is another sign that ethanol production has far reaching consequences beyond just energy. Fortunately for PBG shareholders, the higher costs were passed on to consumers resulting in a slight improvement in gross margins.

The even better news for PBG shareholders is the company raised its full-year guidance. PBG expects profits to be in a range of $2.02 to $2.07 this year, up from prior guidance of $1.90 to $1.98 per share. Brokerage analysts had been forecasting $1.97 per share; revisions by two analysts yesterday have pushed the consensus estimate up to $2.05 per share.

Brokerage analysts seem to expect fellow bottler Coca-Cola Enterprises (NYSE: CCE) to also provide a bullish outlook when it reports on July 26. During the past 30 days, and before PBG's report, about half of the covering analysts raised their projections for full-year earnings. The current consensus estimate calls for CCE to earn $1.25 this year.

Coca-Cola Enterprises is Zacks #1 Rank ("strong buy") and Pepsi Bottling Group is a Zacks #2 Rank ("buy") stock. Both are classified in Beverages-Soft Drinks. This group contains two other Zacks #1 Rank stocks, including Mexico-based bottler Coca-Cola Femsa (NYSE: KOF).

Moving on....

The outlook for home improvement retailers is not getting any better. Yesterday, Home Depot (NYSE: HD) cut its full-year profit guidance, again. HD expects profits to be in a range $2.30 to $2.36 per share. In May, the company predicted profits would total $2.36 per share. In February, the company forecasted earnings of $2.54 to $2.68, though this estimate did include an 18-cent contribution from HD Supply, which is now being sold.

Equally telling is the company's same-store sales forecast. Home Depot now expects total retail sales to be down 1-2% this year. In February, it predicted that sales would be up 0-2%. The company has also lowered the number of new stores it plans to open, 108 versus 115. The forecast for same-store sales remains unchanged with an expectation of a mid-single digit decline.

Compounding matters were statements by Standard and Poor's and Moody's that they were putting hundreds of mortgage back securities - many of which are investment grade - on watch for potential downgrades. Both agencies are worried about losses in the mortgages that back those securities. Many of the securities being monitored are investment grade.

Throwing even more salt on the wound were warnings from two homebuilders.

The housing correction is continuing and despite calls to the contrary, an end to the slump does not appear to be in sight. This is why Building Product-Retail/Wholesale contains four Zacks #4 Rank ("sell") stocks, including Lowe's (NYSE: LOW). Home Depot is currently a Zacks #3 Rank ("hold") stock, but this may reflect that the fact that not all of the covering analysts have reacted to yesterday's announcement.

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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Source: Zacks.com