Zacks Earnings Preview: EZCorp, Federated Department Store, Foundation Coal, J.C. Penny and Kohl's.

CHICAGO -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes EZCorp (Nasdaq: EZPW), Federated Department Stores (NYSE: FD), Foundation Coal (NYSE: FCL), J. C. Penny (NYSE: JCP) and Kohl's (NYSE: KSS). 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.

Next week could bring some systematic risk in the form of midterm elections. The expected outcome is a government stagnated by party affiliations with the Democrats gaining a small majority in the House, the Senate barely split to one side of the aisle or the other and, obviously, a White House not keen on endorsing any blue-tinted legislation. A surprisingly strong showing by either party would raise eyebrows. What is unknown is what happens if problems occur with the new electronic voting machines. Hopefully this won't be an issue, but the widespread implementation of new technology that does not provide a paper trail and several closely contested races does present risks.

The economic calendar is coincidentally pretty light. Tuesday brings the Redbook Retail Sales Index and September consumer credit. Wednesday has the MBA Refinancing Index. Thursday has trade deficit, import price, and wholesale inventory data on deck, as well as the preliminary University of Michigan consumer confidence numbers.

Retailers will begin reporting en masse next week. The reported numbers will matter, but more focus will be placed on the guidance for the holiday season. After all, there are only about 50 shopping days left until Christmas.

The election and third-quarter retailer profits will follow what has been a week when economic news has played a more prominent role than earnings news. The ISM manufacturing PMI fell to its lowest level since June 2003. Productivity stalled, providing ammunition to inflation hawks such as the FOMC's Jeffrey Lacker. October payroll growth came in below expectations, but September and August numbers were revised upwards. M&A also added to the news flow.

Nonetheless, earnings reports continued to come out in large numbers. Overall, third-quarter earnings season remains in the bullish camp with positive surprises outnumbering negative surprises by a ratio of 1.96:1, for stocks within the Zacks Rank universe(a).

Forecasts(b) for full-year 2006 earnings remain basically unchanged in response to earnings reports. For 2007, the outlook has improved slightly with the average revision now nearly unchanged. (Last week, the average revision was -1.9%).

Companies That Could Surprise During the Week of Nov 6 - Nov 10

EZCorp (Nasdaq: EZPW) issued very bullish guidance a few weeks ago, raising its guidance for third-quarter and 2006 full-year earnings, as well as providing a 2007 forecast that was above analysts' projections. Lower levels of bad debt and a smaller than expected impact from new store openings contributed to the earnings momentum. Analysts currently expect EZPW to generate third-quarter profits of 62 cents, which is near the middle of the company's projected range (61 to 64 cents per share). EZPW topped second-quarter expectations by 18 cents and has beaten estimates for three consecutive quarters. EXCorp will report on Thursday, after the close of trading.

Yesterday, Federated Department Stores (NYSE: FD) reported October same-store sales growth of 7.7%; the company had previously projected an increase in the range of 5% to 7%. Notably, analysts had been tweaking their forecasts higher before the numbers were released. As of this morning, the consensus forecast called for third-quarter profits of 26 cents per share, two cents above the projection of a month ago. The most recent consensus is more bullish at 27 cents per share. Federated Department stores will report on Wednesday, before the market opens.

J. C. Penny (NYSE: JCP) raised its guidance for third-quarter earnings yesterday. Based on October same-store sales growth of 8.1%, the company now expects to report third-quarter profits of $1.22 per share instead of $1.11 per share. Analysts have yet to adjust their estimates to factor in the new guidance (the consensus calls for earnings of $1.13 per share), but they had been previously raising their forecasts. JCP has topped the consensus estimate by an average margin of five cents over the past four quarters. J. C. Penny will report on Thursday, before the market opens.

Kohl's (NYSE: KSS) could complete the department store hatrick. KSS generated same-store sales growth of 4.2% last month, which was above the company's guidance for growth of 2% to 4%. One analyst raised his guidance in response, pushing the third-quarter consensus up to 63 cents per share a versus the month-old forecast of 59 cents. The most recent consensus is more bullish at 64 cents per share. KSS has topped expectations for three consecutive quarters. Kohl's will report on Thursday, Nov 9, after the close of trading.

Foundation Coal (NYSE: FCL) warned in mid-October that third-quarter earnings would be reduced by approximately 17 cents per share because of a non-cash charge related to debt refinancing, scheduled miners' vacations and a project at one of the company's mines. The trend in coal prices is not in the company's favor, weighed down partially by expectations for a mild winter. The current third-quarter consensus estimate of 34 cents is eight cents below the forecast of a month ago. The most recent consensus is more bearish at 13 cents per share. FCL missed second-quarter projections by 12 cents. Foundation Coal should report Tuesday, before the market opens.

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

(a) Stocks within the Zacks Rank universe that have reported earnings. The Zacks Rank is assigned to companies with earnings estimates made available by brokerage analysts. The Zacks' database contains earnings estimates for approximately 4400 companies.

(b) Changes made to full-year forecasts within the last four weeks. The average is calculated based on 90% of the companies that have reported to prevent the skewing effect of outliers. The worse 5% of revisions and the best 5% of revisions have been excluded.

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 +32.4%. 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 145.9% annually (+4.7% vs. +11.6%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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