Diageo and Heineken
CHICAGO--(BUSINESS WIRE)--June 14, 2006
Zacks.com releases the latest Zacks Industry Rank.
Stocks featured in this week's analysis include AmBev (NYSE:ABV),
Brown Forman (NYSE:BF/B), Diageo PLC (NYSE:DEO) and Heineken
(OTC:HINKY). To see the Zacks Industry Rank and the trend in earnings
estimates revisions for all 208 industry groups, visit
Zacks Industry Rank Analysis written by Charles Rotblut, CFA,
Senior Market Analyst for Zacks.com.
Ironically, given the inverted yield curve, estimates for brewers
and distillers are rising. When the Fed speaks, people listen. This
sums up happened last week. Fed Chairman Ben Bernanke and Fed governor
Donald Kohn squashed any hopes of a pause at the upcoming meeting.
More importantly, given that there will only be two sets of PPI and
CPI reports between now and the Aug 8 meeting, the probability of two
summertime rate hikes is rather high.
The risk of more rate hikes caused the yield curve to return to
its inverted state. When the two-year treasury note trades at a higher
yield then the 10-year note (inversion), the implication is that the
bond markets anticipate slowing economic growth. An inverted yield
curve, however, may also simply mean that short-term bond traders are
unsure about how many rate hikes are forthcoming. Such confusion is
warranted given that most economic crystal balls are cracked.
Personally, I have made a complete reversal on what I think will
happen at the June meeting, because of reaction to Big Ben's comments.
Following the May employment numbers, I thought the FOMC might pause
its trend of rate hikes at the June meeting. What a difference a week
There is always danger that the Fed will tighten too much. The
effect of a rate hike is never felt until months afterward; however,
current data implies economic stagnation is not a concern. The charts
for Dec 2007 copper and aluminum futures show a continuation of strong
worldwide demand. Yes, metals prices are off their highs, but they
remain well above year-ago levels. More importantly, earnings
forecasts for the average company within the Zacks Rank universe1 are
unchanged from a week ago. Despite the turbulent markets, estimates
are holding firm for 2006 and this is bullish.
Despite the good underlying conditions, the markets have been
volatile enough to drive a man to drinking, which brings us to
Beverages-Alcoholic. This group has seven stocks with a Zacks #2 Rank
or better. Ironically, the home countries for these seven stocks reads
like a World Cup gambling line with Brazil - AmBev (NYSE:ABV), The
Netherlands - Heineken (OTC:HINKY), England - Diageo PLC (NYSE:DEO)
and the U.S. - Brown Forman (NYSE:BF/B) represented.
Behind the numbers is the simple fact that people are apparently
drinking more beer. ABV, the sole Zacks #1 Rank stock in the group,
said last month that its Brazilian Beer operations generated 8.1%
sales volume growth. The company credited the weather, higher
disposable income and market share gains. Half of the covering
analysts upped their full-year forecasts in response, causing the
consensus estimate to rise by 35 cents over the past 30 days to $2.03
HINKY projects, on its web site, worldwide beer consumption to
increase 2-3% annually. The company projects even stronger growth in
Central Eastern Europe, Latin America, Asia and Africa because of
population growth, higher incomes and a shift from hard liquor to
beer. The sole analyst to cover Heineken in the U.S. has more than
doubled his forecast for 2006 earnings in response, from $1.09 per
share to $2.28 per share.
Fiscal 2007 estimates for Diageo have risen recently. Over the
past 30 days, a revision by one of the five covering analysts caused
the consensus estimate to rise by four cents to $3.81 per share.
Here in the U.S., Brown-Forman recently delivered fiscal
fourth-quarter earnings that were seven cents above expectations. The
company generated earnings of 61 cents per share and revenue growth of
16%. Gross margins widened, due in part to pricing power. CEO Paul
Varga predicted that fiscal 2007 earnings would be in range of $3.10
to $3.30 per share. Analysts had previously forecast fiscal 2006
profits of $3.16 per share, though one analyst upped his number,
causing the consensus estimate to rise by a penny.
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.
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
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
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
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 to 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
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.
(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
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.
Charles Rotblut, CFA, 312-630-9880 x 352
Press spacebar to pause and continue. Press esc to stop.