Zacks Industry Rank Analysis Highlights: Ford, Paccar and Toyota - Press Releases

For Immediate Release

Chicago, IL – August 05, 2010 – Stocks featured in this week’s Zacks Industry Rank analysis include Ford (F), Paccar (PCAR) and Toyota (TM).

Zacks Industry Rank Analysis is written by Dirk Van Dijk, CFA, Chief Equity Strategist for Zacks.com.

Autos in the Fast Lane

There are four closely related industries in the sector that are near the top of the charts. The first two are very small, at least in terms of the number of companies involved. With GM and Chrysler gone, the Domestic Auto industry is down to just two firms, Ford (F), and big rig truck maker Paccar (PCAR). However, both of them hold the coveted Zacks #1 Rank, which gives this industry a perfect score, which incidentally it also had last week.

The Engine industry also has just two firms in it, and it is in a tie for 5th place among the 256 industries tracked with an average score of 2.00, also the same as last week. Normally I don’t highlight industries with just two firms in them, but the Auto industry is particularly important to the economy. Also, the overall industry is much bigger than just the firms in those two “industries.”

It is not just the firms that put together the final car, but the firms that make the parts that go into them. For the most part, those firms are much smaller than the big automakers, but can post even bigger gains when things are going well (and can be just awful when the industry hits the skids).

The Auto OEM industry is not doing all that poorly, sitting in 17th place, an improvement of 6 slots from last week and an average Zacks rank of 2.32, down from 2.48 last week. In terms of the number of companies, it is a far larger industry than the final assemblers are at 31. Of those, six hold the coveted Zacks #1 Rank (Strong Buy) and an additional ten hold the attractive Zacks #2 Rank (Buy).

If the distribution of Zacks ranks were completely random, you would “expect” that just 20% of firms in an industry would hold a rank of #1 or #2. In the Auto Parts industry, 51.6% do.

Of course, Ford is not your only choice when you go to the dealer. Foreign Auto companies are a very significant part of the market. They are also doing well, right behind the parts firms in 18th place -- an improvement of 21 spots in the last week. The industry has an average Zacks rank of 2.33, down from 2.56 last week. There are nine firms in the Foreign Auto industry, with three #1s and two #2s.

The table below shows the stocks from industries that hold the coveted Zacks #1 Rank. Historically, Zacks #1 Ranked stocks have far outperformed the overall market. The firms range in size from large caps to micro caps, with more of the large caps being found among the Final brands like Ford or Toyota (TM) and the parts firms being mostly small- or mid-cap firms. As for valuation, these firms look a little on the expensive side, if you are just looking at this year’s earnings, but the earnings are very reasonable if you look out to next year.

Besides, these are super cyclical firms that you are supposed to by when the current P/Es are high. While it is unlikely that the U.S. will return to pre-recession levels of car sales any time soon, if that were to happen, these firms would all simply mint money given the inherent operating leverage that they have.

Just being in the black in the current economy is a very significant achievement considering the whole industry was more or less on death doorstep just a year ago.

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Contact: Dirk Van Dijk, CFA
Company: Zacks.com
Phone: 312-265-9211
Email: pr@zacks.com
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FORD MOTOR CO (F): Free Stock Analysis Report
 
PACCAR INC (PCAR): Free Stock Analysis Report
 
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
 
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