Zacks Earnings Preview: Advance Auto Parts, Buffalo Wild Wings, Sun Healthcare Group, Inc., and Waste Management

Business Wire, Oct 27, 2008

CHICAGO -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Advance Auto Parts (NYSE: AAP), Buffalo Wild Wings (Nasdaq: BWLD), Sun Healthcare Group, Inc. (Nasdaq: SUNH) and Waste Management (NYSE: WMI). To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Earnings Preview is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.

The Week's Events

Friday is Halloween, but let's hope the Fed does not spook investors before then.

The Federal Open Market Committee will hold a 2-day meeting on Tuesday and Wednesday. Another rate cut seems likely, though the size is anybody's guess. Fed Fund futures are suggesting a 50-basis point cut.

A big move in stock prices following the release of the meeting's statement on Wednesday afternoon would not be surprising. Keep in mind that stocks could trade in a completely different direction on Thursday.

Earnings season will hit full stride, with nearly 750 companies confirmed to report. Within this group are 4 Dow components, including Exxon Mobil (NYSE: XOM). Joining the Dow components will be 122 other members of the S&P 500.

Energy could be a big focus with reports from 54 companies within this sector.

Upcoming key economic data will include:

* Monday: September new home sales

* Tuesday: Conference Board October consumer confidence

* Wednesday: September durable goods orders, weekly crude inventories, Fed statement (about 2:15 ET)

* Thursday: Third-quarter GDP, weekly initial jobless claims

* Friday: September personal income and spending, October Chicago PMI, final September University of Michigan consumer confidence survey

According to the Federal Reserve's web site, Fed Governor Randall Kroszner will discuss risk at a conference on Thursday morning. Fed Chairman Ben Bernanke will speak about the mortgage markets at a symposium on Friday afternoon.

As has been the case for the past several weeks, the credit crunch, the economy, central banks and trader sentiment all remain wildcards. Despite all of the volatility, the major indexes have settled into trading range since Oct 10. If these ranges continue to hold, buyers could emerge.

Companies That Could Issue Positive Earnings Surprises

Buffalo Wild Wings (Nasdaq: BWLD) has topped expectations for 3 consecutive quarters. During the past 30 days, 1 of the covering brokerage analysts has revised his third-quarter forecast, resulting in a 1-cent increase in the consensus earnings estimate to 31 cents a share. Buffalo Wild Wings is scheduled to report earnings on Monday, Oct 27, after the close of trading.

Sun Healthcare Group, Inc. (Nasdaq: SUNH) raised its full-year earnings guidance earlier this month. The company reclassified 5 centers as discontinued. Furthermore, SUNH stated that favorable rates on its variable rate debt resulted in lower interest expense. As a result, the company expects profit of 91 cents to 94 cents per share, up from its prior guidance of 85 cents to 90 cents for 2008. The company has topped market estimates for 5 consecutive quarters. Analysts forecast third-quarter EPS growing 36.30% to 20 cents. Sun Healthcare is scheduled to report earnings on Thursday, Oct 30, before the start of trading.

Last week, Waste Management (NYSE: WMI) preannounced third-quarter earnings above the consensus earnings estimate. The trash hauler expects to report quarterly profit of 62 cents to 63 cents per share, versus the then consensus estimate of 60 cents per share. (Recent revisions have pushed the consensus earnings estimate up to 62 cents per share.) The company has topped analyst forecasts for 3 consecutive quarters. Waste Management is scheduled to report earnings on Thursday, Oct 30, before the start of trading.

Companies That Could Issue Negative Earnings Surprises

Advance Auto Parts (NYSE: AAP) said earlier this month that third-quarter sales growth slowed because of the Gulf Coast hurricanes and a weakening economy. (The company also said it expects the trend to continue for the rest of the year.) Brokerage analysts have accordingly slashed their quarterly earnings forecast by 8 cents to 57 cents per share. AAP has missed once during the past 3 quarters. Advance Auto is scheduled to report earnings on Wednesday, Oct 29, before the start of trading.

Charles Rotblut, CFA, is the senior market analyst for Zacks.com.

Want to turn earnings surprises into quick profits? Learn how by visiting http://at.zacks.com/?id=3206.

About the Zacks Rank

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of 30%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained 43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 81% annually ( 2 % vs. 11%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.