CHICAGO, Jan. 13, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: General Electric (NYSE: GE), 3M (NYSE: MMM), United Technologies (NYSE: UTX), Technology SPDR ETF (NYSE: XLK) and Boeing (NYSE: BA).

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Here are highlights from Wednesday's Analyst Blog:

Ranking Tech, Energy, Aerospace and Conglomerates

Conglomerates

This sector is a relatively small one, accounting for 3.45% of total expected earnings for 2011, but it does contain several household name stocks among its 10 members, including Dow components General Electric (NYSE: GE), 3M (NYSE: MMM) and United Technologies (NYSE: UTX). It is expected to post total net income that is 6.68% lower in the fourth quarter than a year ago. That is a slowdown from the positive 6.20% growth it posted in the third quarter, although the third quarter growth was near the bottom of the growth rankings already.

For the full year, it holds the dubious distinction of being the only sector expected to earn less in 2010 than in 2009. Things are expected to get better as we move into 2011, with above average growth of 19.08%, and the growth continuing at 16.63% in 2012. Then again, all the other sectors raised the base in 2010, and often by a big margin, so the higher than overall index growth is mostly a case of the sector catching up to the rest.

On the top line, revenues are expected to be up just 0.59% in 2010, but accelerating to 2.20% in 2011 and 5.31% in 2012. For all three years, that growth is well below that of the overall index, although the gap in 2012 is not all that big.

For 2010, the anemic growth on the top line was still better than an actual decline on the bottom line. That can only mean falling margins, which dropped to 8.04% for 2010 from 8.16% in 2009. However, net margins are expected to rebound strongly, rising to 9.36% in 2011 and on to 10.31% by 2012. For both years that will put them comfortably above those of the market as a whole.

The estimate revisions picture is very solid for these names, with 3.60 upward FY1 revisions for each cut, and 6.67 for each cut when it comes to FY2 estimates. On the valuation front, the sector is a bit on the pricy side, at 17.7x 2010 earnings and 14.9x 2011 earnings.

By its very nature, this sector is harder to make generalizations about than the other sectors. There are probably some good short-term trading opportunities in the sector, and despite the high valuations some interesting longer-term investments as well in the group. However, you need to pick and choose carefully among the individual stocks.

As a group I would categorize the sector as a turnaround story, and given the strong estimate momentum, one that appears to be working. I would market weight the sector and consider going to an overweight on a dip.

Technology

This is one of the biggest and most important of the sectors, expected to account for 17.15% of all earnings in 2011. That is second only to the Financials in terms of total earnings. Growth in the fourth quarter is expected to slow to 8.88% from a very strong 43.85% in the third quarter.

For the full year, Tech is expected to be close to the top of the growth charts with earnings up 45.68% over 2009. That is particularly impressive, since unlike many of the other high growth sectors for 2010, earnings did not fall off a cliff in 2009. That year they were down just 4.10%.

Growth, though, is expected to slow to a somewhat below-average 13.69% for 2011 and 11.55% for 2012. On the top line, growth is expected to be 13.78% for 2010. That is among the very best for the year and is all the more impressive since it is not just a function of higher commodity prices as was the case for the other two high revenue growth sectors for 2010, Energy and Materials.

Revenue growth is expected to slow to 9.85% for 2011 and to 7.23% in 2012, but in both cases that growth is comfortably above that of the index overall. The sector already boasts the highest net margins at 15.71% for 2010. These are expected to climb still further, reaching 16.26% in 2011 and 16.91% for 2012. That is almost twice the level of net margins for the index as a whole. In terms of estimate momentum, the ratio of increases to cuts is positive for both years at 1.34 for FY1 and 1.28 for FY2, although on both counts they are lower than the index as a whole.

Valuations are above the market as a whole, with the sector trading at 16.6x 2010 earnings and 14.6x 2011. This sector normally trades at a premium to the overall market, and the premium looks smaller than normal, so I am not that concerned about the somewhat higher-than-market P/E's for the sector. I would be inclined to overweight the sector modestly.

Technology SPDR ETF: (NYSE: XLK)

Aerospace

This is a small sector, with only ten firms and expected to account for just 1.75% of overall S&P 500 profits in 2011. Almost half of those earnings are expected to come from one firm, Boeing (NYSE: BA). The rest of the sector is closely tied to the Pentagon (BA is, as well) and if the new Congress is really serious about cutting overall spending, then look for Defense to be on the table. With two wars going on, the cuts will probably come more from hardware than from operations, which is bad news for the firms in this sector.

Quarter-to-quarter growth can be very lumpy in this sector. Year-over-year growth was a blistering 144.50% in the third quarter, but in the fourth quarter, earnings are expected to actually be 11.53% below fourth quarter of 2009 levels. For the year as a whole, growth lagged the overall market badly in 2010, with just 14.79% expected.

Things are not expected to get much better in 2011, either with total net income expected to rise just 5.59%. The sector is expected to finally rise above the rest of the market in terms of income growth in 2012 with growth of 15.38%.

As for the top line, the sector had the dubious distinction of being the only sector besides Finance (and revenues for Financials are flakey by nature -- more on that tomorrow) to actually post lower total revenues in 2010 than in 2009, although the decline was just 0.48%.

Things are expected to pick up a bit in 2011 with growth of 4.81% expected, rising to 5.57% growth for 2012. That is still lower than the overall market, though. The sector is below average when it comes to net margins, at 6.25% for 2010. They are expected to rise to 6.30% in 2011 and 6.87% in 2012. That will keep them still well below the market as a whole, and indeed the margin growth is less than that of the market as a whole, meaning the sector is falling further behind.

The revisions ratios are better than the index overall for FY1 at 3.33 but below it for FY2. I would caution though that for both years the sample is very small at this point (we are near the seasonal low point for revisions activity for all sectors, which gets exacerbated for sectors that are small to begin with).

While the overall fundamentals look worse than average for the sector, to some extent that has been priced into the market with lower-than-average P/E ratios. The sector is trading for 13.1x 2010 and 12.4x 2011 earnings. Still, there are probably better places to invest both short- and long-term, and I would underweight the sector.

Energy

This is one of the largest sectors, accounting for 12.15% of all S&P 500 earnings in 2010, rising to 12.76% for 2011. Driven by higher oil prices earnings growth has been stellar, with total net income up 90.75% in the third quarter over a year ago. That growth is expected to cool to 28.29% in the fourth quarter, but that is still pretty good.

For the full year, the sector is expected to post total net income that is 48.84% above 2009 levels, with growth of 15.73% and 17.58% expected for 2011 and 2012, respectively. Even so, total net income in 2012 is expected to be 10.8% below 2008 levels.

Revenues are expected to be up 19.21% in 2010, slowing to 12.43% growth in 2011 and 7.44% in 2012. Of course, the actual earnings and revenue growth are going to depend a great deal on what oil prices do. I happen to be moderately bullish on oil prices for 2011, looking for a year-end price of about $105 a barrel.

Net margins for the sector are moderately below average at 7.65% for 2010, but are expected to climb to 7.88% for 2011 and 8.62% in 2012, still below average but closing the gap. On the estimate revisions front, the sector is currently somewhat better than the index as a whole for both years, at 2.69 increases per cut for FY1 and 1.97 for FY2.

The sector trades at a discount to the market at 14.6x 2010 earnings and just 12.6x 2011 earnings. So what is not to like about the sector? Higher than average growth, growing net margins, good estimate momentum and a discount to the overall market. From a long-term strategic point of view, large oil reserves are getting harder and harder to find (and are located in more and more challenging environments, both natural and political).

Meanwhile, demand continues to grow, particularly in China and India, as well as domestically in the oil producing countries themselves. The more challenging physical environments do mean that it will be more expensive to extract the oil, but that is good news for the oil service firms. Rising prices over time means that those that hold significant reserves in the ground will be rewarded. I would overweight this sector significantly.

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