Zacks Industry Rank Analysis Highlights: ConAgra Foods, Diamond Foods, Lennar, Sara Lee and...

CHICAGO -- Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis include ConAgra Foods (NYSE: CAG), Diamond Foods (Nasdaq: DMND), Lennar (NYSE: LEN), Sara Lee (NYSE: SLE) and Walgreen Co. (NYSE: WAG). To see the Zacks Industry Rank and the trend in earnings estimates

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

The week between Christmas and New Year's Day is typically a slow period for the financial markets. Compounding matters this year was the day of mourning for President Ford, which resulted in the stock exchanges being closed for four calendar days - a rarity. As a result, there wasn't a material number of estimate revisions.

One stock that did buck the trend, however, was Walgreen Co. (NYSE: WAG). WAG reported just before Christmas and analysts continued to revise their fiscal 2007 estimates last week.

The drug store chain earned 43 cents per share in its fiscal first quarter, two cents above expectations. Total comparable store sales rose 9.7%, paced by a 5.8% jump in front-end comparable drugstore sales. WAG benefited from an increase in pharmacy patients thanks to Medicare Part D. Although reimbursements under the drug benefit are less than the cash price previously paid by patients, the drag on margins are offset by higher volume.

Based on the strong earnings report, analysts now expect WAG to earn $2.03 this fiscal year versus the previous forecast of $1.99 per share. Walgreen's is a Zacks #2 Rank stock and is classified in Retail-Drug Stores.

Another company that reported in late December was ConAgra Foods (NYSE: CAG). The agricultural conglomerate generated a fiscal second-quarter profit of 40 cents per share, six cents above expectations. Improved margins (divestures and cost-cutting) and 10% sales growth in the company's Food and Ingredients segment contributed to the strong performance.

Looking forward, CAG raised its fiscal 2007 profit guidance to a range of $1.28 to $1.33 per share. Five of the eight covering brokerage analysts responded by adjusting their forecasts. The new consensus estimate is slightly above ConAgra's guidance at $1.34 per share.

ConAgra is a Zacks #1 Rank stock and is classified in Food/Miscellaneous-Diversified. The group contains five other Zacks #1 Rank stocks, including Sara Lee (NYSE: SLE) and Diamond Foods (Nasdaq: DMND).

Last week, I discussed the negative trend in earnings estimates among homebuilders. Two days ago, Lennar (NYSE: LEN) added to the bearish sentiment by cutting its fiscal fourth-quarter guidance. Excluding valuation adjustments and write-offs, the company expects to report profits within a range of 70 cents to 75 cents per share. This guidance compares to analyst expectations for profits of $1.05 per share. I would expect the consensus estimate to be cut over the next few days.

The interactive Zacks Industry Rank List allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. See the list at http://at.zacks.com/?id=3208.

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." Since inception in 1988, #1 Rank stocks have generated an average annual return of +31.8%. 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 143.6% annually (+4.8% vs. +11.8%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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