Eagle Materials

For the past few months I've had my eye on Eagle Materials (EXP). This company has taken a big hit down from its 52-week high. It has had a very pessimistic sentiment because of the decline of the housing bubble. Over the course of this stock's entire life, it has had great life. It wasn't until the past 9 months that it experienced a very large jump, which was followed by a similar decline.

EXP just released their earnings today, which were pretty close to being in line with expectations. More importantly, they gave guidance for FY '07. These numbers are above analysts expectations for the most part. This should bring a much needed increase in sentiment for the company. Already in after-hours trading, the stock is up 6%. This gives us an indicator on how the market views the earnings results.

EXP knows their business a lot better than any analyst could. Analysts will raise their estimates in the coming weeks in order to make it look like they know what they're doing. These raised estimates will give the stock even more momentum.

Positive earnings reports can have an effect on stocks for months to come. A market anomaly known as Post Earnings Announcement Drift (PEAD) often times occurs. PEAD is when a stock releases an earnings surprise and the stock proceeds to drift in the same direction for the next months to come. This should happen with EXP.

EXP has reached a low point where it has shown support. Heavy buying keeps it from falling below this level. Check out the latest insider transactions. They all show strength at these levels. At these levels, it makes me believe that there is more chance of upside than downside.

The valuation of this stock looks good as well
P/E: 10.38 for EXP , 13.78 for Industry
Qtrly Rev Growth (yoy): 26.9% for EXP , 15% for Industry
Operating Margins: 28.5% for EXP , 16.66% for Industry

Lower P/E, yet higher revenue growth year over year and high operating margins? Bargain.

Watch for the trend on this one to finally shift back to positive.
-Sam