In the second quarter, NUE announced a net loss of $133.3 million, or 43 cents per diluted share. However, the performance is dismal compared to a net income of $734.6 million, or $2.31 per share, in the third quarter of 2008.

Losses in the quarter were driven by the negative impact of high-cost pig iron inventories of about $180 million, or 37 cents per share. However, the company claims that the consumption of the high-cost pig iron inventories was completed by the close of the quarter. Additionally, pre-operating and start-up costs of the new facilities increased 58% year over year to $47.1 million in the quarter. These costs are primarily related to the SBQ mill in Memphis, Tennessee; the Castrip project in Blytheville, Arkansas; and the proposed iron-making facility and galvanizing line in Decatur, Alabama.

Net sales plummeted 58% year over year to $3.12 billion, while increasing 26% over the previous quarter. Average sales price per ton increased 1% over the second quarter of 2009 and decreased 45% from the third quarter of 2008. Steel shipments were 5,114,000 tons in the quarter, up 24% over the second quarter of 2009 and down 24% from the third quarter of 2008.

The average scrap and scrap substitute cost per ton used in the quarter was $299, down 4% compared with $312 in the second quarter of 2009 and down 44% from $533 in the third quarter of 2008. Total energy costs decreased about $9 per ton from the second quarter of 2009, due to lower electricity and natural gas prices combined with the productivity benefits of increased utilization. Total energy costs decreased about $8 per ton year over year.

Nucor's liquidity has remained strong with $2.22 billion in cash and cash equivalents and short-term investments. Nucor's steel mill utilization rate increased from 46% in the previous quarter to 69% in the reported quarter.

The company expects earnings in the next quarter to benefit from a significant improvement in raw material costs. However, lower operating volumes/rates in both sheet and bar products could impact fourth quarter results negatively. We maintain our Neutral recommendation on the stock.

Chicago, IL – October 21, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Nucor (NUE), Dow Chemical (DOW), Freeport McMoran (FCX), Mobile TeleSystems (MBT) and VimpelCom (VIP).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s AnalystBlog:

Inflation? What Inflation?

On a year-over-year basis, Crude goods are down 31.5%. However, the year-over-year numbers at the Intermediate -- and especially the Crude -- levels are going to show much slower declines in the next few months.

In October of last year, Intermediate goods prices fell 4.2% while prices fo Crude goods tumbled 16.1%. The plunge continued into November, with intermediate prices down 4.8% and crude goods falling 13.1%. This is a key reason why the year over year earnings for firms in the Materials sector, like Nucor (NUE), Dow Chemical (DOW) and Freeport McMoran (FCX) are going to generally look ugly in the third quarter, but will look wonderful in the fourth quarter.

From a broad economic point of view, this just adds to the compelling case for the Fed to keep interest rates low, and possibly even extend its unconventional quantitative easing policies. The danger is a recovery that is lackluster and falters, not that the economy overheats and inflation gets out of control.

MBT Confirms Outlook, Ups CapEx

Russia’s incumbent telecom carrier Mobile TeleSystems (MBT) released its 2009 outlook yesterday. The company has lifted its capital expenditure (CapEx) guidance to $1.8 billion from $1.5 billion as per the previous guidance.

This increase is primarily due to the expected growth in capital spending in Central Asian markets and appreciation of the ruble against the US dollar. While the revised CapEx for 2009 is lower than $2.2 billion spent in 2008, as a percentage of sales it still remains at 22%. In contrast, the company’s archrival VimpelCom (VIP) is expected to spend 12%-15% of sales in 2009.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

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 at http://at.zacks.com/?id=5518.

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Chicago, IL – September 17, 2009 – Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week’s analysis include D.R. Horton (DHI), KB Home (KBH), Pulte Homes (PHM), Allstate (ALL), Hartford Financial Services (HIG), Travelers (TRV), Loews (L), Humana (HUM), Stericycle (SRCL), C.R. Baird (BCR), Celgene (CELG), Gilead Sciences (GILD), Anadarko Petroleum (APC), EOG Resources (EOG), AK Steel (AKS), Nucor (NUE), U.S. Steel (X), Fifth Third (FITB), Regions Financial (RF), Suntrust Banks (STI) and Zions Bancorp (ZION).

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

This week: Third-Quarter Earnings Forecast

Though the economy has stabilized, third-quarter results for the majority of companies will still be below year prior levels.

Per share profits for the S&P 500 are projected to fall 15.4%. The median company is forecast to report a 14% drop in per share earnings. (The difference being that the S&P 500 forecast is a weighted projection.) More than 340 companies may have experienced a year-over-year drop in profits.

On a revenue basis, things are not much better. Median company sales are forecast to have dropped 7.2%.* More than 360 companies are expected to report a year-over-year drop in earnings.

It's important to realize that during July and August 2008, the economy was in fairly good shape. Lehman did not collapse until September 2008. Furthermore, the credit crunch's grip severely tightened over the 2-month span of September and October 2008. As a result, many companies are now facing tough comparisons, meaning year-over-over declines in profits now.

It should be noted, however, that not all comparisons will be difficult. In fact, some industries are forecast to report actual earnings growth.

Industries Likely To Show Growth

Homebuilders

It may sound shocking, but homebuilders are likely to have some of the best year-over-year comparisons in terms of profitability.

There are 2 reasons for this. First, conditions in the housing industry were deteriorating last year, with mortgages becoming increasingly hard to get. Second, the housing market is now stabilizing, as is evidenced by the rising number of new and existing home sales.

This change will allow D.R. Horton (DHI), KB Home (KBH) and Pulte Homes (PHM) to encourage shareholders with bottom line improvements by 50% or more. The improvements are relative, however, since all 3 companies will report sizable losses for Q309.

Insurance

Several insurance companies could impress investors with double-digit growth. Though some, like Allstate (ALL) and Hartford Financial Services (HIG), have the benefit of prior-year losses, others like Travelers (TRV) and Loews (L) are experiencing true growth. (Revenues and earnings will rise for TRV and L).

The surprisingly calm hurricane season (fingers crossed that it stays this way) has helped property and causality insurers. Nearly all insurance companies have also benefited from the rebound in the financial markets. The economy is a drag, though there seem to be certain segments where premiums are rising.

Health Care

Despite all the talk about reform, profits for the entire medical sector continue to rise. The sector is less economically sensitive and less affected by swings in commodity prices. As result, several medical companies are likely growing both revenues and earnings this quarter.

Those with the strongest growth rates will include Humana (HUM), Stericycle (SRCL), C.R. Baird (BCR), Celgene (CELG) and Gilead Sciences (GILD).

Industries Likely to Report Contraction

Commodity-Related

Commodity-related companies face the toughest year-over-year comparisons. Oil peaked in July 2008 and, though the commodity bubble deflated throughout the remainder of the quarter, profits were still very, very strong. As a result, energy and metals companies are projected to report significant drops in Q309 profits.

In the Energy sector, exploration & production (E&P) companies such as Anadarko Petroleum (APC) and EOG Resources (EOG) will report the biggest declines. Among metals companies, AK Steel (AKS), Nucor (NUE) and U.S. Steel (X) could all report losses after large profits in Q308.

Banks

Though government intervention has stabilized much of the financial sector, many banks remain unprofitable. High unemployment, a sustained high level of foreclosures and a weak commercial real estate market are all problem spots for the sector. As a result, analysts are projecting Fifth Third (FITB), Regions Financial (RF), Suntrust Banks (STI) and Zions Bancorp (ZION) to post losses.

It's All About Expectations

The one positive for the third-quarter earnings season is that there is a general expectation that the numbers will be bad. Therefore, even those companies that report losses will be measured up against the consensus estimates and not the year prior results. What we could well see is a repeat of second-quarter earnings season, where brokerage analyst forecasts proved to be too pessimistic.

As always, pay attention to guidance and the level of visibility companies have about the fourth quarter and the early part of 2010. The markets will want assurance that business conditions are starting to improve, even if sales still remain at depressed levels.

*12 companies were excluded from the revenue forecasts due to a lack of broker estimates. The inclusion of these companies would have not significantly altered the median revenue forecast.

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 http://at.zacks.com/?id=5611.

About Zacks

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 3:1 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 http://at.zacks.com/?id=5610.

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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.

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.

Contact: Charles Rotblut, CFA
Company: Zacks.com
Phone: 312-265-9352
Email: pr@zacks.com
Visit: www.zacks.com

Per share profits for the S&P 500 are projected to fall 15.4%. The median company is forecast to report a 14% drop in per share earnings. (The difference being that the S&P 500 forecast is a weighted projection.) More than 340 companies may have experienced a year-over-year drop in profits.

On a revenue basis, things are not much better. Median company sales are forecast to have dropped 7.2%.* More than 360 companies are expected to report a year-over-year drop in earnings.

It's important to realize that during July and August 2008, the economy was in fairly good shape. Lehman did not collapse until September 2008. Furthermore, the credit crunch's grip severely tightened over the 2-month span of September and October 2008. As a result, many companies are now facing tough comparisons, meaning year-over-over declines in profits now.

It should be noted, however, that not all comparisons will be difficult. In fact, some industries are forecast to report actual earnings growth.

Industries Likely To Show Growth

Homebuilders

It may sound shocking, but homebuilders are likely to have some of the best year-over-year comparisons in terms of profitability.

There are 2 reasons for this. First, conditions in the housing industry were deteriorating last year, with mortgages becoming increasingly hard to get. Second, the housing market is now stabilizing, as is evidenced by the rising number of new and existing home sales.

This change will allow D.R. Horton (DHI), KB Home (KBH) and Pulte Homes (PHM) to encourage shareholders with bottom line improvements by 50% or more. The improvements are relative, however, since all 3 companies will report sizable losses for Q309.

Insurance

Several insurance companies could impress investors with double-digit growth. Though some, like Allstate (ALL) and Hartford Financial Services (HIG), have the benefit of prior-year losses, others like Travelers (TRV) and Loews (L) are experiencing true growth. (Revenues and earnings will rise for TRV and L).

The surprisingly calm hurricane season (fingers crossed that it stays this way) has helped property and causality insurers. Nearly all insurance companies have also benefited from the rebound in the financial markets. The economy is a drag, though there seem to be certain segments where premiums are rising.

Health Care

Despite all the talk about reform, profits for the entire medical sector continue to rise. The sector is less economically sensitive and less affected by swings in commodity prices. As result, several medical companies are likely growing both revenues and earnings this quarter.

Those with the strongest growth rates will include Humana (HUM), Stericycle (SRCL), C.R. Baird (BCR), Celgene (CELG) and Gilead Sciences (GILD).

Industries Likely to Report Contraction

Commodity-Related

Commodity-related companies face the toughest year-over-year comparisons. Oil peaked in July 2008 and, though the commodity bubble deflated throughout the remainder of the quarter, profits were still very, very strong. As a result, energy and metals companies are projected to report significant drops in Q309 profits.

In the Energy sector, exploration & production (E&P) companies such as Anadarko Petroleum (APC) and EOG Resources (EOG) will report the biggest declines. Among metals companies, AK Steel (AKS), Nucor (NUE) and U.S. Steel (X) could all report losses after large profits in Q308.

Banks

Though government intervention has stabilized much of the financial sector, many banks remain unprofitable. High unemployment, a sustained high level of foreclosures and a weak commercial real estate market are all problem spots for the sector. As a result, analysts are projecting Fifth Third (FITB), Regions Financial (RF), Suntrust Banks (STI) and Zions Bancorp (ZION) to post losses.

It's All About Expectations

The one positive for the third-quarter earnings season is that there is a general expectation that the numbers will be bad. Therefore, even those companies that report losses will be measured up against the consensus estimates and not the year prior results. What we could well see is a repeat of second-quarter earnings season, where brokerage analyst forecasts proved to be too pessimistic.

As always, pay attention to guidance and the level of visibility companies have about the fourth quarter and the early part of 2010. The markets will want assurance that business conditions are starting to improve, even if sales still remain at depressed levels.

Sector Rank as of Sep 16
Sector	This Week's Zacks Rank	Last Week's Zacks Rank	FY09 Revisions Ratio	FY09 Estimates Revised Up	FY09 Estimates Revised Down
Consumer Staples	2.63	2.65	2.40	168	70
Conglomerates	2.73	2.73	4.67	14	3
Retail-Wholesale	2.76	2.74	1.88	506	269
Auto-Tires-Trucks	2.77	2.76	0.73	22	30
Computer and Technology	2.90	2.91	2.19	599	273
Medical	2.93	2.96	1.30	193	149
Construction	2.97	2.97	1.20	53	44
Basic Materials	2.98	3.02	1.55	118	76
Consumer Discretionary	3.00	2.97	1.05	122	116
Oils-Energy	3.00	3.01	0.87	238	274
Utilities	3.02	3.03	0.89	55	62
Industrial Products	3.05	3.03	1.36	87	64
Business Services	3.08	3.01	0.97	30	31
Finance	3.13	3.09	1.07	335	312
Aerospace	3.23	3.23	0.33	19	58
Transportation	3.23	3.23	0.70	81	115

View the Zacks Industry Rank List at http://www.zacks.com/zrank/zrank_inds.php. This interactive list allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. The table above is the Zacks Sector Rank List, which shows the trend in estimate revisions on a broader scale.

*12 companies were excluded from the revenue forecasts due to a lack of broker estimates. The inclusion of these companies would have not significantly altered the median revenue forecast.Zacks Investment Research

Yesterday, fifteen of the thirty DJIA components closed higher; 245 of the S&P500 closed up and 42 of the NASDAQ100 finished on higher ground.  Trading was subdued with NYSE volume of 1.05 billion well below last year's average of 1.49 billion.  The DJIA gained 4 points to close virtually flat at 9543; the NASDAQ and S&P500 each recorded gains of 0.01%.  Declining issues beat those that advanced eight to seven.  Treasuries were mixed after the government successfully auctioned $39 billion in five-year notes.  The Treasury is scheduled to auction $28 billion of 7-year notes today.

Five of the S&P500 sectors recorded gains.  The consumer services sector, which advanced 1.2% yesterday, edged up 0.5% on improved expectations for the consumer segment due to better-than-projected housing numbers and confidence report.  Healthcare shares issues were off 0.2%.

Basic material and industrial shares each declined 0.7% on Chinese Premier Wen Jiabao's comments regarding economic difficulties in that country, particularly domestic consumption.  The Chinese cabinet reportedly is assessing steps to control overcapacity in steel and cement production. US Steel (NYSE:X) and Nucor (NYSE:NUE) each dropped 2.4%. 

DJIA components 3M (NYSE:MMM) fell 1.7%, Caterpillar (NYSE:CAT) was off 1.2%, and General Electric (NYSE:GE) declined 1.3%.  Housing news, nevertheless, continued to signal a leveling off in the sector, with DR Horton (NYSE:DHI) up 5.7%, Beazer Homes (NYSE:BZH) up 5.0%, and Lennar (NYSE:LEN) up 4.1%.  Hovnanian Enterprises (NYSE:HOV) rose 43 cents, or 9.4%, to $5

Chicago, IL - June 25, 2009 - Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis include Stericycle (SRCL), Quest Diagnostic (DGX), Biogen Idec (BIIB), AmeriSourceBergen (ABC), Abbott Labs (ABT), Sunoco (SUN), Tesoro (TSO), AK Steel (AKS), Nucor (NUE), United States Steel (X), Fifth Third (FITB), First Horizon National (FHN), Zions Bancorp (ZION), Suntrust Banks (STI), Franklin Resources (BEN), AllianceBernstein Holding (AB), Texas Instruments (TXN), National Semiconductor (NSM) and Micron (MU).

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

This Week: Second-Quarter Earnings Outlook

Second-quarter earnings will be ugly.

Median EPS is projected to drop 21.2%. Nearly 75% of S&P 500 members are forecast to report earnings that are lower than a year ago. 62 companies are projected to have lost money.

These numbers are not unexpected given that we remain in the midst of a recession. They could even prove to be too pessimistic given the propensity of companies to surprise and the relative improvements in economic conditions.

Growth Industries

The one sector projected to show the strongest growth is also the one with the highest political risk - Medical. The majority of medical care providers, health insurers, pharmacy benefit managers and drug companies should report a year-over-year increase in profits.

Zacks #2 Rank ("buy") stocks expected to report growth include Stericycle (SRCL) (+14.4%), Quest Diagnostic (DGX) (+13%), Biogen Idec (BIIB) (+9.8%), AmeriSourceBergen (ABC) (+7%) and Abbott Labs (ABT) (+5%).

The medical sector is less economically sensitivity than other sectors. Plus, the expansion of Medicare Part D has made prescriptions more affordable.

The obvious risk, however, is the ongoing discussions about healthcare reform. Though these talks have no impact on current earnings, they could significantly impact future earnings.

Another area of growth is refining. Sunoco (SUN) and Tesoro (TSO) are expected to have increased second-quarter profits by 46% and 223.7% respectively. These impressive numbers are a reflection of last year's spike in oil prices.

The problem is that the recent rise in oil prices is hurting margins.

Full-year earnings estimates are falling for both companies, which means even if TSO and other refiners top expectations, guidance could be weak. Our oil analyst, Sheraz Mian, downgraded TSO last month to a long-term sell recommendation.

Industries With Profit Declines

Since most industries will show a year-over-year decline in median EPS growth, I'm going to focus on 2 industries with the biggest projected declines.

Steel is among the worst, with 3 companies - AK Steel (AKS), Nucor (NUE) and United States Steel (X) - projected to report year-over-year declines in excess of 130% each.

These companies are facing very tough comparables because of last year's commodity bubble. Though AK Steel (AKS) said on Tuesday that its results would show a sequential quarterly improvement, any narrower loss would be because of cost-cutting and not improving business conditions.

NUE is a Zacks #4 Rank ("sell") stock. AKS and X are Zacks #3 Rank ("hold") stocks.

Banks will not fare much better. Regional banks are forecast to report a median decline of 98.7% and the large banks are projected to report a 61.3% decrease. Though the government has deemed some banks too big to fail, the FDIC has shut down 40 since the start of the year.

Home foreclosures have yet to peak and credit card default rates are rising. At the same, the ongoing housing slump and tighter credit standards continue to hurt mortgage originations. And though Q208 was not great for the banks, the credit crunch was not as severe as what was witnessed in the second half of 2009.

The largest year-over-year declines is likely to come from Fifth Third (FITB) (-689.3%, the bank is swinging from a profit, on an adjusted basis, to a loss), First Horizon National (FHN) (-211.6%), Zions Bancorp (ZION) (-189.7%) and Suntrust Banks (STI) (-166%).

Where To Look For Surprises

There are 2 industry groups that I would keep an eye on for potential positive surprises - Finance-Investment Management and Electronic-Semiconductor.

As I said last week, profit forecasts are rising for several mutual fund managers, including Franklin Resources (BEN) and AllianceBernstein Holding (AB).

Positive mutual fund inflows and growth in assets under management have some analysts rethinking their forecasts. However, since many of the covering analysts have not followed suit, the consensus earnings estimates could prove to be too low.

The semiconductor industry appears to be in the early stages of a recovery. Therefore, while profits will be terrible (down -61.5%), they could very well be better than forecast.

Texas Instruments (TXN) raised its Q2 forecast earlier this month, SEMI's (a chip industry association) book-to-bill ratio has increased for 3 consecutive months and analysts have been revising their full-year forecasts higher. Plus, National Semiconductor (NSM) beat by 18 cents when it reported last week.

We'll get another early indicator of how chip earnings look relative to expectations this afternoon, when Micron (MU) reports. The consensus earnings estimate calls for a loss of 43 cents per share.

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 http://at.zacks.com/?id=5611.

About Zacks

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 3:1 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 http://at.zacks.com/?id=5610.

Follow us on Twitter: http://twitter.com/ZacksInvestment

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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.

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.

Contact: Charles Rotblut, CFA
Company: Zacks.com
Phone: 312-265-9352
Email: pr@zacks.com
Visit: www.zacks.com

These numbers are not unexpected given that we remain in the midst of a recession. They could even prove to be too pessimistic given the propensity of companies to surprise and the relative improvements in economic conditions.

Growth Industries

The one sector projected to show the strongest growth is also the one with the highest political risk - Medical. The majority of medical care providers, health insurers, pharmacy benefit managers and drug companies should report a year-over-year increase in profits.

Zacks #2 Rank ("buy") stocks expected to report growth include Stericycle (SRCL) (+14.4%), Quest Diagnostic (DGX) (+13%), Biogen Idec (BIIB) (+9.8%), AmeriSourceBergen (ABC) (+7%) and Abbott Labs (ABT) (+5%).

The medical sector is less economically sensitivity than other sectors. Plus, the expansion of Medicare Part D has made prescriptions more affordable.

The obvious risk, however, is the ongoing discussions about healthcare reform. Though these talks have no impact on current earnings, they could significantly impact future earnings.

Another area of growth is refining. Sunoco (SUN) and Tesoro (TSO) are expected to have increased second-quarter profits by 46% and 223.7%, respectively. These impressive numbers are a reflection of last year's spike in oil prices.

The problem is that the recent rise in oil prices is hurting margins.

Full-year earnings estimates are falling for both companies, which means even if SUN and TSO top expectations, guidance could be weak. Our oil analyst, Sheraz Mian, downgraded TSO last month to a long-term sell recommendation.

Industries With Profit Declines

Since most industries will show a year-over-year decline in median EPS growth, I'm going to focus on 2 industries with the biggest projected declines.

Steel is among the worst, with 3 companies - AK Steel (AKS), Nucor (NUE) and United States Steel (X) - projected to report year-over-year declines in excess of 130% each.

These companies are facing very tough comparables because of last year's commodity bubble. Though AKS said yesterday that its results would show a sequential quarterly improvement, any narrower loss would be because of cost-cutting and not improving business conditions.

NUE is a Zacks #4 Rank ("sell") stock. AKS and X are Zacks #3 Rank ("hold") stocks.

Banks will not fare much better. Regional banks are forecast to report a median decline of 98.7% and the large banks are projected to report a 61.3% decrease. Though the government has deemed some banks too big to fail, the FDIC has shut down 40 since the start of the year.

Home foreclosures have yet to peak and credit card default rates are rising. At the same, the ongoing housing slump and tighter credit standards continue to hurt mortgage originations. And though Q208 was not great for the banks, the credit crunch was not as severe as what was witnessed in the second half of 2009.

The largest year-over-year declines are likely to come from Fifth Third (FITB) (-689.3%, the bank is swinging from a profit, on an adjusted basis, to a loss), First Horizon National (FHN) (-211.6%), Zions Bancorp (ZION) (-189.7%) and Suntrust Banks (STI) (-166%).

Where To Look For Surprises

There are 2 industry groups that I would keep an eye on for potential positive surprises - Finance-Investment Management and Electronic-Semiconductor.

As I said last week, profit forecasts are rising for several mutual fund managers, including Franklin Resources (BEN) and AllianceBernstein Holding (AB).

Positive mutual fund inflows and growth in assets under management have some analysts rethinking their forecasts. However, since many of the covering analysts have not followed suit, the consensus earnings estimates could prove to be too low.

The semiconductor industry appears to be in the early stages of a recovery. Therefore, while profits will be terrible (down -61.5%), they could very well be better than forecast.

Texas Instruments (TXN) raised its Q2 forecast earlier this month, SEMI's (a chip industry association) book-to-bill ratio has increased for 3 consecutive months and analysts have been revising their full-year forecasts higher. Plus, National Semiconductor (NSM) beat by 18 cents when it reported last week.

We'll get another early indicator of how chip earnings look relative to expectations tomorrow, when Micron (MU) reports. The consensus earnings estimate calls for a loss of 43 cents per share.

Zacks Premium and Zacks Elite subscribers can view the Zacks Industry Rank List at http://www.zacks.com/zrank/zrank_inds.php. This interactive list allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. Shown below is the Zacks Sector Rank List, which shows the trend in estimate revisions on a broader scale.

Sector Rank as of Jun 24
Sector	This Week's Zacks Rank	Last Week's Zacks Rank	FY09 Revisions Ratio	FY09 Estimates Revised Up	FY09 Estimates Revised Down
Retail-Wholesale	2.57	2.52	2.79	419	150
Consumer Staples	2.78	2.80	1.91	174	91
Medical	2.87	2.91	1.20	243	202
Consumer Discretionary	2.89	2.85	0.93	136	146
Computer and Technology	2.93	2.94	1.98	513	259
Utilities	2.98	2.97	0.74	60	81
Oils-Energy	3.01	3.02	0.94	340	363
Business Services	3.02	3.01	1.02	50	49
Construction	3.05	3.18	0.44	36	81
Conglomerates	3.07	2.96	0.64	9	14
Aerospace	3.08	3.13	0.44	11	25
Auto-Tires-Trucks	3.11	3.06	0.51	21	41
Basic Materials	3.13	3.10	0.71	131	185
Industrial Products	3.16	3.18	0.78	85	109
Finance	3.17	3.17	0.85	454	533
Transportation	3.30	3.25	0.40	77	191

Charles Rotblut, CFA, is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

Zacks Investment Research

* According to a WSJ report, Goldman Sachs (NYSE:GS) has reportedly delivered a letter to congress advising of plans to repay funds borrowed under TARP sometime tomorrow.  JP Morgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) are expected to repay their borrowings as early as today

* According to a WSJ report, Sanofi-Aventis (NYSE:SNY) is seeking a mega-deal in the US, which could include such possible candidates as: Bristol-Meyers-Squibb (NYSE:BMY), Amgen (NASDAQ:AMGN), Allergan (NYSE:AGN), or Biogen (NASDAQ:BIIB)

* Nucor (NYSE:NUE) said it expects a second-quarter loss of 55 cents to 65 cents a share, versus estimates of a 69 cent loss, citing benefits from cost cuttings and recent strengthening in order entry

* Texas Instruments (NYSE:TXN) received an analyst upgrade from Merrill Lynch, expecting strong margin expansion. Price target was raised to $27 from $18

* Qualcomm's (NASDAQ:QCOM) rating was lifted to a "conviction buy" at Goldman Sachs (NYSE:GS) with a price target of $53

* McDonald's (NYSE:MCD) posted comparable sales numbers for May of 5.1%, which failed to equal April's 6.9% advance

* Goldman Sachs (NYSE:GS) downgraded shares of Burlington Northern (NYSE:BNI), and raised CSX (NYSE:CSX)

* Morgan Stanley (NYSE:MS) downgraded shares of Nucor (NYSE:NUE)

* Google (NASDAQ:GOOG) and eBay (NASDAQ:EBAY) will present at the Credit Suisse (NYSE:CS) convergence conference

* Qualcomm (NASDAQ:QCOM) will present at the UBS (NYSE:UBS) Tech and Service conference at 12:45 PM ET

* Procter & Gamble (NYSE:PG) and Coca-Cola (NYSE:KO) are due to present at the Deutsche Bank (NYSE:DB) global consumer and Food Retail Group

As an investor, I realize that you are less concerned with the details that economists seemingly over-analyze and more concerned with what the report means to your portfolio. So, today, I'm going to show you where some of the investment opportunities and risks lie in the current environment.

Consumers Opened Their Wallets

The biggest positive surprise in the report was that Personal Consumption Expenditures ("PCE") actually contributed 1.50 points to GDP.

Clearly, in the first quarter, consumers took advantage of discounted prices. The much higher than expected PCE is part of the reason that the retailers and restaurants have been earning so much more than was expected. Almost every retailer and restaurant in the S&P 500 that has reported so far has come in with higher than expected earnings. Given the need to rebuild savings and the mounting levels of unemployment, I am skeptical that the strong PCE levels can be sustained.

Inventory Levels Plunged

On a forward-looking basis, perhaps the best part of the GDP report was that inventory investment subtracted 2.79 points from growth (versus -0.11 in Q4). Large inventory draw downs in one quarter have a tendency to be reversed in the next quarter. When the shelves are bare, people start to order more to restock them, causing output to rebound.

The destocking of inventories has contributed to the cash flow of the retailers, but the restocking will reverse that. On the other hand, restocking the shelves will increase orders for manufacturers, both here and abroad. The report is not detailed enough to say where exactly the biggest inventory draw downs were, so it does not give that much guidance as to which manufacturers might benefit the most from the restocking.

A Bad Trend for Equipment Makers and Software Developers

Essentially all investment in the real economy, both fixed and inventory, residential and non-residential, came to a screeching halt in the quarter. While ugly contributions from inventories are a good thing, the same cannot be said about fixed investments. There bad is bad, and this was real bad.

Fixed investments, particularly non-residential fixed investment is what drives increases in the productive capacity of the economy (along with investments in education which is counted as part of PCE and state & local spending). In other words, it is the engine of future growth, not just a part of the current growth. The stunning declines in all forms of fixed investment mean that businesses are in effect eating their seed corn. However, given the huge amount of idle capacity in the economy right now, it is easy to understand why businesses are cutting back.

Until we see a large rebound in capacity utilization, it is unlikely that businesses will start to spend more for equipment and software. Capacity utilization is at a post WWII low, and is below 70% for the first time since it has been tracked. As a general rule of thumb, 80% is normal, 85% is a boom and 75% is a nasty recession. This is obviously not good news for more traditional equipment manufacturers, such as Parker-Hannifin (PH) or Ingersoll-Rand (IR), nor is it good news for software firms like Microsoft (MSFT) or Oracle (ORCL).

Expect this part of the economy to remain weak for at least several more quarters. This is particularly true on the structures side. I suspect that most of the spending we did see in the quarter was simply finishing off projects that were started in earlier quarters. The Commercial Real Estate ("CRE") bust is just getting started and will last at least another year. Investment in structures has only started to decline and was a major contributor to GDP up until the third quarter of last year.

This means that demand for the basic materials that go into building large structures, steel, glass and cement, are likely to remain depressed for at least the next year. Not exactly bullish for Nucor (NUE), PPG Industries (PPG) or Cemex (CX).

Vacancy rates going up and effective rents are going down in almost all areas of commercial real estate. I would be very cautious about investing in REITs here. Commercial foreclosures are going to become a much bigger story over the next year. This will hurt the banks, particularly the mid-sized banks (between $1 and $10 billion in assets). The Wall Street titans do have as much exposure (relative to their overall size) to CRE.

The decline in equipment and software has been unusually steep (it was down 33.8% in the first quarter, following a 28.1% decline in the fourth quarter), and it now represents the smallest share of the economy since the mid 1960s. The decline will probably continue, but is may be at a slower rate in coming quarters.

At some point it will turn up again since equipment wears out and software becomes obsolete. I would focus on those equipment makers where the product most obviously decays over time. For example, spending on transportation equipment was 61% lower in the first quarter of 2009 than it was a year ago. This means that there is some potential pent up demand for firms like PACCAR (PCAR) that is building up.

Residential Investment Still Slumping

Perhaps the most surprising number on the downside in fixed investment was the subtraction of 1.36 points from Residential Investment ("RI"). RI is now only 2.7% of GDP, down from a peak of 6.3% in the Q4 of 2005.

RI turning up is a classic signal that a recession is ending, and there is no sign that it is happening yet, but it seems unlikely that RI will fall to zero. Normally the rebound is very sharp, but I have my doubts that it will be so this time around, given the huge inventory of unsold houses, both new and used and the second wave of foreclosures that is starting to crash upon the shore.

I have long been very bearish on the Homebuilders like D.R. Horton (DHI), however at this point I am becoming more neutral since it is hard to see how much lower residential investment can go as a percentage of GDP. That does not mean that I expect a big rebound anytime soon, but the worst of that particular storm may have passed.

Net exports helped prevent the quarter from being a total disaster, adding 1.99 points to growth. This was however not due to a surge of exports, but rather a collapse of imports.

The decline in imports was stunning, contributing 6.05 points to growth. (Imports are a subtraction from GDP, so when they fall GDP goes up). Put another way, if we had continued to import in the first quarter at the rate we had in the fourth quarter, then GDP would have crashed at an annualized rate of over 12% in the first quarter.

When inventories are drawn down, we buy less from China as well as less from domestic manufacturers. In case you have not noticed a lot of the stuff on the shelves of Wal-Mart Stores (WMT) and Target (TGT) comes from overseas. If PCE can continue its surprising strength going forward, the decline in imports is unlikely to continue. That, however, is a big IF.

No industry is more exposed to a decline in world trade more than the shipping industry. There are lots of ships that were ordered during the boom times that are just putting to sea. It will be a while before enough ships are scrapped to bring capacity into line with demand, thus keeping shipping rates very low. Ships represent very large capital investments and having them idle is very expensive. While the group has been hammered, I would still avoid those firms for anything but a very short term trade.

Understand that the longest recession since the Great Depression is not over by a long shot, but it will not last forever. We are past the steepest rate of decline, but are still going down.

The U.S. consumer is once again proving to be the Rasputin of the world economy, he is very hard to kill thanks, in part, due to some extraordinary measures taken by Dr. Bernanke. This is probably the key reason for the better than expected PCE numbers.

As I said earlier this week, there are still very substantial risks out there that could cause the rate of decline to accelerate again, most notably the prospect of long messy bankruptcies in Detroit, and the worst fears of the Flu epidemic coming true (almost impossible to tell at this point). However, the seeds of recovery have been planted. Inventory will need to be restocked and eventually businesses will have to replace some of their equipment and will start to spend again. However, I would not expect a bumper crop from those seeds. The recovery, when it comes, is likely to be very anemic.

Best of Luck,
Dirk van Dijk, CFA
Director of Research,
Zacks Equity Research

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