Why Sears Holdings' Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of retailer Sears Holdings (Nasdaq: SHLD  ) caught a big tailwind today, surging as much as 22% in intraday trading after a series of announcements from the company.

So what: It doesn't take a full earnings report to get investors excited during earnings season -- a preliminary earnings report often does just as well. Sears' shares shot off like a rocket today on news that the company expects to turn a big profit in the first quarter. In a press release, Sears' said that first-quarter earnings per share will be in a range of $1.46-$1.84. While that sounds great, the profit was driven by $235 million in gains from sales of stores in the U.S. and Canada. Even after backing out that gain though, the company's first-quarter loss looks like it will still be narrower than the $1.69 that Wall Street had expected.

Now what: This could be another glimmer of hope for long-suffering Sears' shareholders. And along with the preliminary first-quarter results, the company also announced yesterday that it'd file some of the SEC paperwork associated with the spinoff of its Hometown and Outlet stores -- a move that will bring $400 million-$500 million to the parent company.

But what does it mean for the bigger picture? Same-store sales for the first quarter are still negative for both Sears and Kmart. Adjusted EBITDA -- a cash-flow measure -- is positive, but the bottom line is still in the red. As a retailer and operating company, Sears still looks like quite a wreck. As an investment vehicle though, there may still be hope from some investors that Eddie Lampert can make some magic happen.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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