Zacks Industry Rank Analysis Highlights: Casey's General Stores, Ford, General Motors, and Pantry.

CHICAGO -- Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis include Casey's General Stores (Nasdaq:CASY), Ford (NYSE:F), General Motors (NYSE:GM) and Pantry (Nasdaq:PTRY). To see the Zacks Industry Rank and the trend in earnings estimates revisions for all 208 industry groups, visit http://at.zacks.com/?id=2563.

Zacks Industry Rank Analysis written by Charles Rotblut, CFA, Senior Market Analysis for Zacks.com.

Fourth-quarter earnings season started off with some less than stellar news, with some high-profile companies warning. However, the Dow did spend a few days above 11,000. More importantly, earnings have been positive.

Within the Zacks Rank universe(a), 137 companies, or about 3%, have released fourth-quarter results. Within this small sample, 84 companies have delivered a positive surprise and 32 have missed expectations. The number of reports will rise sharply over the next few weeks with literally thousands of companies releasing results.

The large amount of data will create volatility in the Zacks Rank. The reason is that the Zacks Rank factors in both earnings surprises and earnings estimate revisions. Furthermore, the indicator calculates both the relative strength of estimate revisions and the date of the change in revisions. In other words, a company that delivers a surprise this week and increases guidance by a material amount is more likely to earn a Zacks #1 Rank stock designation than a company that will not report until February.

From an industry perspective, retailers are more likely to gravitate towards a neutral rating of 3.00, because the majority of these companies operate on a February-January fiscal year. Most other industries, however, are likely to move towards a rank of 1.00 (Strong Buy) or 5.00 (Strong Sell) because the majority of companies operate on a January-December fiscal year.

Keep in mind that because the Zacks Industry Rank is calculated by averaging the Zacks Rank for all companies within a given industry, only groups with a very small number of companies are likely to actually to be among the very top or bottom industries on a given week (as defined by a Rank close to 1.00 or 5.00).

For instance, consider Retail-Convenience Stores, which has a Zacks Industry Rank of 1.00 and a net ratio of increased estimates/total estimates(b) of 0.27. This group has just two stocks with a Zack Rank: Casey's General Stores (Nasdaq:CASY) and Pantry (Nasdaq:PTRY). CASY has been using a combination careful merchandising and cost controls to deliver strong revenue and EPS growth. As a result, two of the three covering analysts have increased their estimates for fiscal 2006 within the past 30 days. PTRY has been exceeding profit expectations by wide margins and, last month, increased its guidance for fiscal 2006 earnings to $2.80-$2.90 per share from $2.55-$2.65 per share. PTRY has also benefited from careful merchandising, including higher margin, private-label goods.

Notably, both companies credited gasoline sales for contributing to growth. Although one would expect higher gasoline prices to contribute to higher revenues, both companies were able to increase the number of gallons sold and the profitability of each gallon sold. Higher revenues and widening margins are a powerful combination.

At the other end of the Industry Rank Table is Auto Manufacturers-Domestic, which has a Zacks Industry Rank of 4.00 and a net ratio of increased estimates/total estimates of -0.14. This group is comprised of Ford (NYSE:F), a Zacks #3 Rank stock, and General Motors (NYSE:GM), a Zacks #5 Rank, stock. Both companies have been in the news because of their financial problems and loss of market share. What hasn't been discussed much, though, is the trend in estimate revisions. About a quarter of the analysts who cover GM have cut their forecasts for 2006 within the past 30 days; the consensus estimate for earnings of 84 cents is more than 40% below the level it was at just three months ago. (On Friday, CEO Rick Wagoner refused to provide guidance for 2006 when speaking to a group of securities analysts.) The 2006 consensus estimate for Ford has fallen by a nearly similar margin, from 95 cents to 59 cents.

For all industries, the net ratio of increased estimates/total estimates is 0.00, unchanged from a week ago. The average Zacks Rank is, as always, is 3.00. (The Zacks Rank is distributed according to a bell curve with the same number of companies receiving a Zacks #1 Rank and a Zacks #5 Rank every day).

(a) The Zacks Rank is assigned to companies for companies with earnings estimates made available by brokerage analysts. The Zacks' database contains earnings estimates for approximately 4400 companies.

(b) The net increased estimates/total estimates is calculated by subtracting the number of estimates revised downwards over the past four weeks from the number of estimates revised upwards over the past four weeks and dividing this total by the total number of fiscal year estimates. Ratios above 0.00 indicate a higher number of positive revisions than negative revisions. Ratios below 0.00 indicate a lower number of positive revisions than negative revisions.

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.

For over 18 years, 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 +33%. 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 143.5% annually (+4.9% vs. +12%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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The Zacks Rank, and all of its recommendations, is created by Zacks & Co., member NASD. Zacks.com displays the Zacks Rank with permission from Zacks & Co. on its web site for individual investors.

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(c) The Zacks Performance Rank performance is the total return of equal weighted simulated portfolios consisting of those stocks with the indicated Zacks Rank net of fees. Results reflect the reinvestment of dividends and other earnings. Simulated results do not represent actual trading and may not reflect the impact that economic and market factors might have had on decision-making if an adviser were actually managing a client's money.

(d) The S&P 500 Index ("S&P 500") is a well-known, unmanaged index of the prices of 500 large-company common stocks selected by Standard & Poor's. The S&P 500 includes the reinvestment of all dividends, no transaction costs, and represents the gross returns before management fees.

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.