Zacks Industry Rank Analysis Highlights: Norsk Hydro, Petrobras, PetroChina and Repsol.

CHICAGO -- Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis include Norsk Hydro (NYSE:NHY), Petrobras (NYSE:PBR), PetroChina (NYSE:PTR) and Repsol YPF (NYSE:REP). 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 Analyst for Zacks.com.

Just in time for the summer vacation season, crude oil prices are rising. On Friday, oil prices closed at $73.93 per barrel - almost a six-week high. Reports from the weekend suggest the roads were crowded heading into the Fourth of July holiday, boosting demand for gasoline.

Increasingly, the United States is facing competition from developing countries for oil, which brings us back to the Oil & Gas-International Integrated group for the second consecutive week. Three companies within this group have been recent beneficiaries of positive earnings estimate revisions.

Three of the seven covering analysts raised their forecasts on Brazil's Petrobras (NYSE: PBR). Two of the four covering analysts raised their forecasts on Repsol YPF (NYSE: REP), a Spanish/Argentine company. One of the four analysts raised his projection on PetroChina (NYSE: PTR). All three are Zacks #1 Rank stocks. Other than a rise in the price of crude, there was no news to explain the recent upward revisions. The most likely reason is that oil's ability to maintain elevated prices is causing analysts to be more optimistic about the earnings outlook for these companies.

The Norwegian oilfield service workers strike is continuing, but analysts have yet to adjust their estimates as a result. However, on Friday, Norsk Hydro (NYSE: NHY) did cut its oil and gas output target. The company anticipates producing 585,000 barrels of oil equivalents per day this year, a 5% reduction from its previous guidance. The company blames lower production and production problems in Norway, the U.S. Gulf of Mexico and Canada for the revision. NHY specifically stated that the strike was not accounted for in the revised target. One analyst raised his target on NHY last week -- prior to the release of the company's new production target. The revision brought the consensus estimate up to $2.57 per share. A month ago, the estimate stood at $2.32 per share.

High oil prices are one of the concerns that some observers have about the pace of economic growth in the second half of the year. Rising interest rates are another, though the Federal Open Market Committee hinted that it was considering an end to its streak of interest rate hikes. Given that there will only be one set of PPI, CPI, industrial production and durable goods orders reports before the August meeting, an 18th hike seems probable.

The Committee will also take into account second-quarter earnings. A total of 81 companies within the Zacks Rank universe(a) have reported so far. Positive earnings surprises have outnumbered negative surprises by a ratio of 3.7:1. Although this is far too small a sample to be representative of how most companies will measure up, it does establish a good base on which to build.

Another sign pointing towards strong second-quarter earnings is the relative tameness of earning warnings season. Although the number of negative revisions did increase recently, the total number of cuts remains proportionately low. Based on a rolling four-week period, 8.1% of full year estimates for all companies within the Zacks Rank universe have been revised downward versus 7.6% a week ago. Conversely, 7.9% of full year estimates have been revised upward versus 7.6% a week ago.

Just prior to the start of first-quarter earnings season (Mar 27), 14% of all estimates had been revised downward and 12% were revised upward. As I have previously stated, the overall number of revisions declined throughout most of June. In the case of warnings, no news is good news.

Given the positive initial profit reports and the relative lack of negative revisions, second-quarter earnings season appears likely to be good, with bullish reports coming out of multiple companies. Forecasts call for the average company(b) within the Zacks Rank to have generated 17.3% growth last quarter. Full-year estimates are calling for 24.5% growth.

To see the complete analysis and listing of the Zacks Sector Rank and Industry Rank scores, go to http://at.zacks.com/?id=2563.

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

(b)This number has been adjusted to excluded outliers. When all companies are included, the average growth rate is 28.2% for the second quarter and 47.1% for the full year. The median numbers are 10.3% and 13.6%, respectively.

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." A $10,000 investment in the Zacks Rank list made in 1988 would now be worth $1.82 million - equivalent to a 33% annualized return! 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 129.7% annually (+5.2% vs. +11.9%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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(a)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.

(b)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.