Sears Holdings (SHLD) projected fourth quarter earnings well above consensus estimates Wednesday. The company estimates EPS for the period will be in a range between $4.87 and $5.39, well above estimates of $4.86 per share. Despite reports in the financial press that sounded much more gloomy about the company's core retail business, real estate sales and derivative contracts are expected to contribute only 8 cents to earnings for the quarter.

Chairman Eddie Lampert has decided against share repurchases for the period, which will result in a cash balance of $3.5 billion, or $23 per SHLD share. What exactly he will use the cash for is still unknown, but many are speculating that a lack of share repurchases in Q4 signal that other uses for the money are far more likely in coming months. That seems like a very reasonable assumption.

Shares of SHLD rose 3.5% on the pre-announcement, to $172 per share, but it still appears to be attractively valued. Full year earnings should come in around $9.38 per share, putting the stock's trailing P/E at around 18. With 2007 earnings expected to jump more than 20 percent, a below-market multiple for Sears stock seems quite low. As a result, it remains a large long position of mine.

Full Disclosure: Long SHLD