Earnings Reports to Refresh Market Views - Analyst Blog

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The following is an excerpt from John Blank's latest Zacks Market Strategy Report. To access the full PDF, please click here.

This fall, “divergence” is the stock market's mantra. The divergence mantra says trade on higher GDP and rates in the U.S., and lower GDP and lower rates abroad.  

In October, share market indexes trade on a full-year 2015 earnings landscape -- and on the slosh of global money. A new calendar year is one quarter away. Fair value computations price a firm 2015 earnings and revenue growth outlook.

San Fran Fed Sees Economic Momentum

Here's what the latest macro Fed writer had to say:

“Recent data suggest that economic momentum was largely sustained entering the second half of this year, although growth is likely to slow somewhat from the strong second quarter. Overall consumer spending in recent months has been disappointing, but motor vehicle sales have been robust. Housing market activity has been encouraging, and overall construction spending has risen. Industrial production also continued to expand in recent months.

“On balance, we expect real GDP to grow at about a 3% pace over the remainder of this year and next year.”

Zacks Sector/Industry/Company Telescope

With a new earnings season on the way, early October Zacks Industry Ranks are to be taken with a grain of salt. There is a two-month window in our system. Meaningful change in analysts estimate revisions will come going forwards.  

There is only one Very Attractive sector: Info Tech. Two Attractive sectors are Financials and Industrials.

(1) Info Tech is Very Attractive. The leaders are Computer-Office Equipment and Semiconductors.  

Company to look at: Methode Electronics (MEI) is a Zacks #1 Rank.  

This company manufactures component devices worldwide for automotive OEMs and information processing and networking equipment companies, and many other IT segments.

(2) Financials are Attractive. Real Estate leads. Finance and Bank & Thrifts follow. The loser is Investment Funds.

Company to look at: Markit Ltd. (MRKT) is a Zacks #1 Rank.  

This company provides financial information processing services. This includes pricing and reference data, indices, valuation and trading services, and others.

(3) Industrials are Attractive. The leader is Metal Fabricating. Close on the heels is Railroads, Business Services and Aerospace & Defense.  

Company to look at: Tenaris SA (TS) is a Zacks #2 Rank.

This Luxembourg corporation is a leading manufacturer and supplier of seamless steel pipe products and services to the oil & gas, energy and other industries.

(4) Consumer Discretionary is a Market Weight. This is due to two bright spots: Apparel and Media. Autos are in the middle. Losers are Publishing and Consumer Electronics.

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(5) Energy is a Market Weight. The brightest spot across all Zacks Industries this time around is the Coal Industry. Most industries are in the middle. Oil & Gas Drilling is Very Unattractive.

(6) Health Care is Market Weight. The bright spot is Medical Care. Drugs and Medical Products are Unattractive.

(7) Telcos are Market Weight. Just a middle of the road ranking in play before fresh earnings reports come in.

(8) Utilities are Market Weight. Another middle-of-the-road ranking in play before fresh earnings reports.

(9) Materials are Unattractive. The bright spot is Steel. Paper, Building Products, Chemicals and Metals Non-Ferrous hold the sector back.

(10) Consumer Staples is Very Unattractive. Tobacco, Agribusiness, Soaps & Cosmetics, Food & Misc. Staples are all in the tank.

This was an excerpt from John Blank's latest Zacks Market Strategy Report. To access the full PDF, please click here.


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