2008-08-20 12:03:05 -

- 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 Corp. (NYSE: NUE), Nordstrom, Inc. (NYSE: JWN), Ultra Clean Holdings, Inc. (Nasdaq: UCTT), Methanex Corp. (Nasdaq: MEOH) and Fred's Inc. (Nasdaq:

FRED).

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Here are highlights from Tuesday's Analyst Blog:

Nucor Feeling Auto Slowdown

Long-term steel contracts, constant cost-reduction efforts, higher steel prices, lower interest rates, strong cash flow position and a dominant acquisition strategy inspire our optimism with respect to the nation's largest recycler of steel scrap Nucor Corp.'s (NYSE: NUE) performance in the coming quarters. However, a slowdown in steel demand from the automobile sector and increased production in China are matters of concern. Thus, we rate the stock a Hold and raise our six-month target price to $55.00.

Nearly 55% of Nucor's steel sheet volumes are under long-term price contracts, which will provide the company a cushion against higher raw material costs. It had been able to successfully pass on higher raw material costs through a mechanism of steel surcharges, which helped the company maintain or even improve its operating margins. Going forward, we believe long-term price contracts will help Nucor to maintain its near-term profitability.

Nordstrom Adjusts Realistically

Nordstrom, Inc. (NYSE: JWN) reported second-quarter sales of $2.287 billion, which was in-line with its preliminary report, and EPS of $0.65, which was $0.01 above consensus. In addition, Nordstrom now expects to earn $0.49-$0.54 per share in the third quarter and $2.55-$2.65 for full-year 2008. The company's previous full-year guidance was $2.65-$2.80.

As we previously wrote, Nordstrom's consensus estimates were too high for the second half of the year and would have to come down. Those estimates are now moving closer to our estimates. As a result, we think the stock will be range-bound for the next six months. We maintain our Hold rating.

Ultra Clean Carving a Niche

June quarter top and bottomline results for Ultra Clean Holdings, Inc. (Nasdaq: UCTT) slightly missed consensus estimates. The company is expanding its product line to include frame assemblies, top plate assemblies and process modules.

The Seiger acquisition is progressing seamlessly and the company is transitioning several product lines to Shanghai. This has the effect of diversifying the revenue base as well as growing margins. Despite the progress, semiconductor weakness will provide a headwind for any non-semi gains. Consequently, we would recommend investing in shares of UCTT and are reiterating our Buy rating.

Methanex Upgraded to Buy

The world's largest producer and marketer of methanol, Methanex Corp. (Nasdaq: MEOH), is benefiting from improving fundamentals, lower costs and declining average gas costs. New applications for methanol imply strong future growth. It has a strong cash flow that drives dividend increases and stock buybacks. We believe that a revaluation of the stock is warranted and feel the stock should trade at 11.5x 2008 earnings. This implies a $30 target and a Buy rating.

New markets for methanol such as dimethyl ether (DME) and biodiesel offer the potential for growth. Demand growth of 4% should exceed supply growth of 3%. DME could push potential demand growth as high as 10%. Supply growth will be absorbed by demand growth in China. Operating rates are 84% globally now. The company is benefiting from declining average gas costs as well. Each $1/Mcf decline in natural gas is worth $0.80 in EPS.

Fred's at Fair Value to $15

Fred's Inc. (Nasdaq: FRED) reported solid second-quarter sales of $447 million, up 5 percent year-over-year, with comp-store sales growth of 4.9 percent. The company's sales growth indicates that Fred's continues to benefit from customers trading down to lower cost alternatives as well as the management's strategic efforts.

We increased our second-quarter EPS by $0.01 to $0.10, which is at the high end of the management's EPS guidance of $0.07-$0.10. For fiscal 2008, our estimate goes from $0.70 to $0.72 and our 2009 EPS estimate goes from $0.78 to $0.80.

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