Skip to main content

Zacks Industry Rank Analysis Highlights: Boeing, Flir Systems, Lockheed Martin, Northrop Grumman and Precision Castparts

Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this weeks analysis includes Boeing (NYSE: BA), Flir Systems (Nasdaq: FLIR), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC) and Precision Castparts (NYSE: PCP). 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.

One of the sectors I expected to deliver good third-quarter earnings was Aerospace, and based on the reports published so far, the companies within the sector are surpassing expectations. Per share earnings growth for Aerospace companies within the S&P 1500 Composite (S&P 500, S&P MidCap 400 and S&P SmallCap 600) is running at 27.4%. (The median company within the S&P 1500 Composite is reporting median per share earnings growth of 10.2%.)

There are two primary reasons for the performance. The first is worldwide economic growth. Third-quarter GDP rose 3.9% in the third quarter, according to initial estimates. Growth in Asia and Europe remains stronger than here in the states. As a result, aviation traffic is up, both for commercial airlines and for corporate jets. The second is sustained defense spending, including homeland security. This not only impacts military jets, but weapons, ammunition and surveillance systems - much of which is made by companies within the aerospace sector.

Often, we talk about an industry facing a headwind or benefiting from a tailwind. Given the large number of companies benefiting from the prevailing trends, the aerospace tailwind might be better described as a gust, bordering on a front. Among companies that brokerage analysts have raised 2007 and 2008 profit forecasts on following positive third-quarter earnings surprises are Flir Systems (Nasdaq: FLIR), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC) and Precision Castparts (NYSE: PCP). FLIR is a Zacks #1 Rank ("strong buy") stock, the others are Zacks #2 Rank ("buy") stocks.

The one notable name missing from this group is Boeing (NYSE: BA). The reason for the company's absence from the group is its new jet, the 787 (aka the Dreamliner). BA pushed back the schedule for delivering the new jet because of delays in obtaining parts in addition to flight control software and systems integrations issues. Although this delay will not impact 2007 profits, it does adversely impact 2008 profits by postponing the timing of when revenues from the new jet will be recognized. More than half of the covering brokerage analysts recently cut their 2008 forecasts, causing a 21-cent drop in the consensus estimate to $5.98 per share.

Given the proximity of 2008, the Zacks Rank is factoring in estimate revisions for both this year and next year. In the specific case of BA, estimates are up for 2007 and down for 2008, both of which contribute to the stock's Zacks #3 Rank ("hold") rating.

BA, LMT and NOC are classified in the Aerospace/Defense industry group. PCP is classified in Aerospace/Defense Equipment. FLIR is classified in Electronics-Military Systems.

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.

The performance of the Zacks Rank portfolios shown above for annual and year-to-date periods are the linked monthly total returns (price changes + dividends) of equal weighted hypothetical portfolios, consisting of those stocks with the indicated Zacks Rank, assuming monthly rebalancing and zero transaction costs. These are not the returns of actual portfolios. The hypothetical portfolios were created at the beginning of each month from Jan 1988 forward based on the values of the Zacks Rank available to Zacks' clients before the beginning of each month. The portfolios created monthly from 1988 through September 2006 exclude ADRS and are comprised of stocks that have the indicated Zacks Rank and were covered by at least two analysts at the time of the stocks inclusion in the portfolio. Starting in October 2006 and going forward, the portfolios are comprised of all stocks with the indicated Zacks Rank and do not exclude ADRs, which is more reflective of the list of stocks that customers will find on the Zacks web sites. 2007 returns are for the period of Jan 1 Jun 30, 2007. These performance numbers have been audited from 1995 through 2003 by Autschuler Melovan, a division of American Express Financial.

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
Phone: 312-265-9352
Email: pr@zacks.com
Visit: www.Zacks.com

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.