Zacks Sell List Highlights: Pinnacle West Capital, Silicon Image, Costco, and Paychex

Business Wire,  Sept 19, 2003  

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Business Editors

CHICAGO--(BUSINESS WIRE)--Sept. 19, 2003

Zacks.com releases details on a group of stocks that are part of their exclusive list of Stocks to Sell Now. These stocks are currently rated as a Zacks Rank #5 (Strong Sell). Note that since 1988 the S&P 500 has outperformed the Zacks #5 Ranked stocks by 166.7% annually (11.3% vs. 4.2% respectively). While the rest of Wall Street continued to tout stocks during the market declines of the last few years, we were telling our customers which stocks to sell in order to save themselves the misery of unrelenting losses. Among the #5 ranked stocks today we highlight the following companies: Pinnacle West Capital Corporation (NYSE:PNW) and The Silicon Image, Inc. (NASDAQ:SIMG). Further they announced #4 Rankings (Sell) on two other widely held stocks: Costco Wholesale Corporation (NASDAQ:COST) and Paychex, Inc. (NASDAQ:PAYX). To see the full Zacks #5 Ranked list of Stocks to Sell Now then visit: http://stockstosellprbw.zacks.com/

Here is a synopsis of why these stocks have a Zacks Rank of 5 (Strong Sell) and should most likely be sold or avoided for the next 1 to 3 months. Note that a #5/Strong Sell rating is applied to 5% of all the stocks we rank:

Pinnacle West Capital Corporation (NYSE:PNW) is engaged, through its subsidiaries, in the generation, transmission, and distribution of electricity and selling energy, products and services; in real estate development; and in venture capital investment. Earnings estimates for Pinnacle West Capital have been largely stable over the past month, but remain approximately -10% below levels from two months ago for this year. Next year's estimates are about -5% lower in that timeframe. In the company's most recent quarterly report, in which its net income fell short of last year's total and the consensus, Pinnacle West Capital reduced its 2003 earnings estimate due to a deterioration in the western wholesale power market. As conditions in its struggling industry improve, Pinnacle West Capital should be able to fulfill its potential. But at the moment, investors may want to hold off on opening or deepening a position in the company until its earnings estimates move higher.

Silicon Image, Inc. (NASDAQ:SIMG) designs, develops and markets semiconductors, including transmitters, receivers, controllers and video processors, for applications that require high-bandwidth, cost-effective solutions for high-speed data communications. For the second quarter, Silicon Image posted pro forma net income of $0.00 per diluted share. That was enough to improve upon a year-ago loss, but still came in shy of the consensus by 2 cents. Revenue of $24.3 million improved by +26.3% on a year-over-year basis, but both net income and revenue came in below the sequential quarter. Several other semiconductor-related companies must contend with an environment that still leaves much to be desired, including Siliconix (NASDAQ: SILI). Over the past two months, earnings estimates for this year have slumped by about 6 cents, or -50%, for Silicon Image, while next year's expectation has eroded by about 9 cents, or -36%, in that timeframe. Nevertheless, the company is optimistic for the future and expects continued growth as it reaches the end of this year and into next. Silicon Image is an innovative company that should see better times in the future, but investors may want to refrain from a position in the company right now and watch for its earnings estimates to display more upward mobility.

Below is a synopsis of why these two stocks have a Zacks Rank of 4 (Sell) and should also most likely be sold or avoided for the next 1 to 3 months. Note that a #4/Sell rating is applied to 15% of all the stocks we rank:

Costco Wholesale Corporation (NASDAQ:COST) operates membership warehouses based on the concept that offering members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover. Earlier this month Costco posted some positive sales results for the fourth quarter, with net sales increasing by +11% to $13.42 billion and same-store sales advancing by +7%. However, analysts have still kept the company's earnings estimates at reduced levels from two months ago to the tune of approximately -5% for this year and about -8% for next. In early August, Costco revised its earnings outlook for the fourth quarter and fiscal year downward from its previous guidance. The company stated lower-than-planned gross margins, escalation of costs associated with employee healthcare and workers' compensation expenses, and increased initiatives to improve customer service all led to the lower expectations for the fiscal fourth quarter. Nevertheless, its sales trends have been positive, and as this competitive industry begins to improve, Costco should be in a much better position. Right now though, investors may want to play it safe and wait until Costco's earnings estimates show more buoyancy before adding or deepening a position.