2010 Fourth Quarter Earnings Preview

Here are some U.S.companies we are actively tracking ahead of 2010 fourth quarter press releases. We believe they may have a good chance to eclipse analyst estimates or are about to experience an acceleration in EPS growth. Our previous mock portfolio built on 2010 third quarter earnings preview returned 42% applying the high price achieved during the coverage period (~two months) and 34.2% using December 23, 2010 closing prices.

Asbury Automotive (NYSE:ABG) (see alerts) *Price: $18.51; Coded as a GeoSpecial at $16.72.

One of the largest automotive retailers in the U.S.

• Was mentioned in 2010 third quarter earnings watch article.
• GeoSpecial
• In addition to earlier reasons there are a few more that drive our bullish outlook:
  • GPR of 4**
  • Stock buy back
  • Sells non-core assets
  • Makes accretive acquisition
  • Seeking to reduce leverage
• Stock has had a nice run which could lead to a short-term pull back which we believe would create additional buying opportunities.
• Short-term price target based on a P/E on 15 on analyst 2011 EPS expectations of $1.81:  $27.15

Mercer Intl (NASDAQ:MERC) (see alerts) *Price: $7.71; Coded as a GeoSpecial at $6.93

Owns and operates a diverse pulp and paper business in the southern German states of Saxony and Thuringia, in the former East Germany.

• GPR of 3
• Currently a GeoSpecial
• Just restructured facilities, resulting in more efficient operation of mills
• New stable source of revenue through the sale of surplus energy generated by mills
• We are somewhat concerned that the fourth quarter may see a sequential drop in earnings from a very strong third quarter, but believe the company will make impressive strides in 2011.  We also have to be aware that MERC’s revenues are dominated in Euros and could be affected by a currency fluctuations.
• Short-term price target based on a P/E of 7.5 on our 2010 EPS expectations of $2.32: $17.40