Industry Rank Analysis 06-17-10
The Auto-Tires-Trucks sector is currently in second place among all the economic sectors with an average Zacks Rank of 2.53, an improvement from 2.59 last week. While the Auto industry is very large and important, it does not have a lot of domestic companies at its apex anymore. The Domestic Auto industry has only two firms in it, and thus it is not one that we would usually talk about in this space. It is however tied for 7th place among the 256 industries we rank, with an average score of 2.00.
Ford (F) has a rank of #1, while Paccar (PCAR) has a rank of #3. However, a number of closely related industries are also showing up as attractive based on the Zacks Rank. Together, they tell a tale of the U.S. Auto industry moving into a higher gear.
The industry faced extremely rough times a year ago, and two of the biggest firms went bankrupt. That made life tough for the whole supply chain that surrounded them. Auto sales have since picked up, but still are far below the levels prior to the recession.
The pre-recession sales rates of 16 to 17 million cars and truck a year will probably not be seen for a long time to come. The industry, though, has done an excellent job of cutting costs and adapting to the new slower sales pace. As they have done so, they have been able to pleasantly surprise the Street.
One of the industries that is tied with Autos for 7th place is the Tire industry. It is also small in terms of the number of firms, at just three. It showed an enormous improvement, rising 55 slots as its average score rose to 2.00 from 2.67. Of course that sort of improvement is easier if you only have three firms in the industry than if there are 30.
The Auto Parts-OEM industry has 29 members and is in 34th place with an average score of 2.48. It improved 16 spots in the last week. Out of the 29 members, six hold the coveted Zacks #1 Rank (Strong Buy), and an additional five have a Zacks #2 Rank (Buy) rank.
The Engine industry is in 35th place with an average score of 2.50, unchanged from last week. The Auto Parts stores also tied for 35th place. Finally, the Auto Dealers are in 50th place, with an average rank of 2.54. None of the Car dealers managed to make it to a number one rank, but 7 of the 13 firms in the industry have number two ranks.
The tables below show the Auto and related companies with #1 and #2 ranks. As you can see, there are a wide range of company sizes to chose from. Several look quite cheap based on their P/E ratios for this year and next, but keep in mind that this is a highly cyclical industry, and thus these stocks tend to have extremely low P/E ratios when times are good.
Number 1 Ranked Stocks
| Company | Ticker | Market Cap ($ mil) | P/E Using Curr FY Est | P/E Using Next FY Est | % Change Curr FY Est – 4 wk | % Change Next FY Est – 4 wk | Current Price |
| Ford Motor Co | F | $39,173 | 8.73 | 7.3 | -1.61% | -1.48% | $11.63 |
| Cummins Inc | CMI | $14,945 | 19.79 | 13.98 | 0.13% | -0.08% | $74.51 |
| Magna Intl Cl A | MGA | $7,594 | 12.69 | 10.71 | 0.50% | 1.31% | $67.76 |
| O Reilly Auto | ORLY | $6,992 | 18.29 | 15.92 | 0.05% | 0.10% | $50.62 |
| Borg Warner Inc | BWA | $4,822 | 16.99 | 12.61 | -1.29% | 0.04% | $40.96 |
| Trw Automtv Hld | TRW | $3,894 | 8.46 | 7.5 | 12.45% | 5.36% | $32.64 |
| Tenneco Inc | TEN | $1,486 | 21.26 | 10.76 | 0.00% | 1.09% | $24.87 |
| Cooper Tire | CTB | $1,260 | 8.64 | 8.28 | 0.06% | 1.46% | $20.57 |
| China Auto Sys | CAAS | $524 | 17.23 | 14.96 | 0.00% | 0.00% | $19.35 |
| Strattec Sec Cp | STRT | $72 | 20.5 | 16.49 | 0.00% | 0.00% | $21.93 |
Number 2 Ranked Stocks
| Company | Ticker | Market Cap ($ mil) | P/E Using Curr FY Est | P/E Using Next FY Est | % Change Curr FY Est – 4 wk | % Change Next FY Est – 4 wk | Current Price |
| Johnson Control | JCI | $19,515 | 14.67 | 11.69 | -0.45% | -0.33% | $29.01 |
| Contl Ag-Sp Adr | CTTAY | $10,252 | 25 | 14.2 | -5.53% | -8.84% | $51.26 |
| Carmax Gp (Cc) | KMX | $4,831 | 17.08 | 15.58 | 0.40% | -0.41% | $21.60 |
| Advance Auto Pt | AAP | $4,544 | 14.54 | 12.97 | 8.10% | 7.75% | $51.98 |
| Autochina Intl | AUTC | $576 | 12.73 | N/A | 3.60% | N/A | $29.29 |
| Rush Entrprs-A | RUSHA | $557 | 48.13 | 14.18 | 5.31% | 1.20% | $14.99 |
| Rush Enterprise | RUSHB | $480 | 36.91 | 10.5 | 25.00% | N/A | $12.92 |
| Titan Intl Inc | TWI | $399 | 52.97 | 21.59 | 0.00% | 0.00% | $11.30 |
| Comml Vehicle | CVGI | $337 | N/A | 14.16 | 0.00% | 0.00% | $11.90 |
| Americas Car-Mt | CRMT | $289 | 9.52 | 8.24 | 2.02% | 3.41% | $24.96 |
| Wabash National | WNC | $256 | N/A | 22.89 | 39.56% | 54.29% | $8.24 |
| Stoneridge Inc | SRI | $232 | 24.78 | 7.5 | 0.00% | 0.00% | $8.92 |
| Lithia Motors | LAD | $205 | 11.17 | 8.44 | -5.33% | -2.08% | $7.93 |
| China Auto Logi | CALI | $57 | 7.04 | N/A | 21.62% | N/A | $3.17 |
| Sector | “This Week’s Zacks Rank ” |
“Week ago Zacks Rank ” |
“FY10 Revisions Ratio ” |
“FY10 Estimates Revised Up ” |
“FY10 Estimates Revised Down ” |
“FY11 Revisions Ratio ” |
| Conglomerates | 2.52 | 2.62 | 1.67 | 15 | 9 | 0.93 |
| Auto-Tires-Trucks | 2.53 | 2.59 | 0.76 | 28 | 37 | 0.9 |
| Consumer Discretionary | 2.74 | 2.71 | 0.85 | 150 | 177 | 0.8 |
| Industrial Products | 2.8 | 2.81 | 1.57 | 141 | 90 | 1.1 |
| Retail-Wholesale | 2.81 | 2.74 | 2.32 | 686 | 296 | 2.08 |
| Basic Materials | 2.85 | 2.84 | 0.64 | 96 | 151 | 0.62 |
| Computer and Technology | 2.86 | 2.85 | 1.48 | 487 | 330 | 1.25 |
| Transportation | 2.9 | 2.89 | 1.95 | 215 | 110 | 2.66 |
| Construction | 2.97 | 2.98 | 1.63 | 75 | 46 | 1.78 |
| Business Services | 2.99 | 3.01 | 1.22 | 83 | 68 | 0.99 |
| Consumer Staples | 2.99 | 2.95 | 0.4 | 70 | 174 | 0.32 |
| Medical | 3.09 | 3.11 | 0.67 | 172 | 257 | 0.68 |
| Oils-Energy | 3.1 | 3.11 | 0.52 | 262 | 507 | 0.44 |
| Utilities | 3.12 | 3.2 | 0.57 | 50 | 88 | 0.47 |
| Aerospace | 3.13 | 3.03 | 1.67 | 30 | 18 | 2.47 |
| Finance | 3.13 | 3.14 | 0.77 | 370 | 478 | 0.88 |
In evaluating the Zacks Industry Ranks, you want to see two things: a good overall score (low, meaning more Zacks #1 and #2 Ranked stocks than #4 or #5 Ranked stocks) and some improvement the relative position from the prior week. It is also helpful to understand exactly what the Zacks Industry Rank is.
The Zacks Industry Rank is the un-weighted average of the individual Zacks ranks of the firms in that industry. It does not matter if the stock is the 800 lb gorilla that dominates the industry or some very small niche player in the industry — they have the same influence on the industry rank.
Also, that means that the bigger the industry in terms of number of firms, the less influence any given company has on the industry rank. It also implies that small industries, with just two or three firms, should be the ones found at either the top or the bottom of the list. After all, if there are only two firms in the industry, it is relatively easy to get a Zacks rank of 2.00 (i.e. one with a Zacks Rank of #1 and the other with a #3). Right now, that industry rank would be tied for 6th place among the 255 industries tracked.
The same obviously goes for the bottom of the list as well. If there are 50 firms in the industry, and it ends up at one of the extremes, that means there has to be something pretty significant going on. Thus, I do not always focus on the very highest rated industries, but on the highest rated ones in which there are a large number of firms.
Click here for the Zacks Industry Rank List: http://www.zacks.com/zrank/zrank_inds.php
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.
