Zacks Issues Sell Recommendations on the Following 4 Stocks: AFC Enterprises, MGIC Investment, Documentum, and Schering-Plough

Business Wire, July 24, 2003

Business Editors

CHICAGO--(BUSINESS WIRE)--July 24, 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: AFC Enterprises, Inc. (NASDAQ:AFCEE) and MGIC Investment Corporation (NYSE:MTG). Further they announced #4 Rankings (Sell) on two other widely held stocks: Documentum, Inc. (NASDAQ:DCTM) and Schering-Plough Corporation (NYSE:SGP). 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:

AFC Enterprises, Inc. (NASDAQ:AFCEE) operates, develops and franchises quick service restaurants, bakeries and cafes, primarily under the trade names Popeye's Chicken & Biscuits, Church's Chicken, and Cinnabon, among others. Earlier this month, AFC Enterprises told the NASDAQ Listing Qualifications Panel that it will be unable to file the Form 10-K for 2002 with the SEC by July 16, 2003. Furthermore, the company asked for an additional extension to complete the audits for the fiscal years 2002, 2001, and 2000 and to file its Annual Report. Over the past month, earnings estimates for this year and next have declined by approximately -10% and -6% respectively. AFC Enterprises said it is taking all measures to complete the audits and file the Form 10-K for fiscal year 2002. Given the popularity of its brands, AFC Enterprises should have a much easier time once this matter is put in the past. Therefore, investors may want to play it safe with AFC Enterprises and wait for its earnings estimates to rise in an improved situation before adding or deepening a position in the company.

MGIC Investment Corporation (NYSE:MTG), a holding company, is the leading provider of private mortgage insurance coverage in the United States to the home mortgage lending industry. In mid-July, MGIC Investment posted second quarter net income and diluted earnings per share that fell short of the year-ago total. The company said that the positive impact of the record first half new insurance written volume of $49.5 billion was offset by the record low mortgage interest rates and the lack of an economic recovery. Over the past month, earnings estimates for this year and next have declined by approximately -11% and -9% respectively. Other insurance-related companies that analysts are keeping away from include Ohio Casualty (NASDAQ:OCAS), Midland Company (NASDAQ:MLAN), and Odyssey Re Holdings (NYSE:ORH), just to name a few. However, total revenues for MGIC Investment in the quarter improved by +20% to $459.6 million, due to a 17 percent increase in net premiums earned to $337.1 million and an increase in other revenues and realized gains. Once the economic recovery comes to the forefront, MGIC Investment should be in a much better position. However, with the economy still in a shaky state, investors may want to sit on the sidelines a bit longer with MGIC Investment and watch for its earnings estimates to move higher.

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:

Documentum, Inc. (NASDAQ:DCTM) develops, markets and supports an open, scalable, standards-based content management platform and application suite for managing the content organizations rely on for global operations and to bring their businesses online. Documentum recently reported second quarter non-GAAP diluted earnings per share of 7 cents, which matched the consensus, on total revenue that improved by +26% year-over-year to $68.2 million. However, despite the successes in the quarter, most of the company's more recent revisions have been to the downside and its earnings estimates for this year and next have declined by approximately 5 cents and 6 cents respectively over the past month. The above-mentioned results were in-line with a guidance the company offered in early June. But at that time Documentum had brought down its revenue to $68 million from an earlier expectation of $72 million to $73 million. The company stated that its progress had been hindered by the challenging economic environment, delays in government spending, and inconsistent execution in Northern Asia. Nevertheless, even with all of the challenges, Documentum put together its third consecutive quarter with an all-time record for total revenue. As the economic environment improves, analysts would be more likely to raise this company's earnings estimates. But until then, it may be best to wait a bit longer with a position in Documentum.