Analyst: ‘Show Me Story’ Continues At JC Penney

In a recent report, analysts at Deutsche Bank gave their updated outlook for J C Penney Company Inc JCP 6.8% following the company’s disappointing Q4 earnings report. Analysts have not been impressed by JC Penney’s recent turnaround efforts and believe that the “show me story continues” for the company.

Investors Skeptical

Analysts point out several reasons investors remain skeptical of JC Penney’s long-term potential, including its highly-levered business model and its weak growth record. In addition, there has been no indication that the company’s real estate can be monetized any time soon, so shareholders must remain patient and look for operational improvements for the time being.

Despite the skepticism, analysts point out several positive takeaways from earnings, such as higher than expected free cash flow (FCF), improving clearance mix and margins, solid overall inventory numbers and better-than-expected sales.

Conference Call Notes

According to management, JC Penney is outperforming sales expectations so far in February despite bad weather and West Coast port disruptions. Women’s apparel was a top-performing segment and achieved significant online sales growth.

After pilot testing showed positive results, the company will begin devoting more footwear floor space to women’s. The kids segment is also continuing its positive momentum. The company also discussed the development of a buy online, pick-up in-store same-day service.


JC Penney announced same store sales (SSS) growth guidance of 3-5 percent for 2015. Deutsche Bank is predicting 3.8 percent SSS growth, up from previous estimates of 3.5 percent.

Deutsche Bank has a Hold rating on JC Penney and a $9.00 target on the stock, both of which are based on a 6.5x multiple on a 2017 EBITDA forecast of $1.026 billion.

The stock is down more than 7 percent in early trading on Friday after rising more than 30 percent so far in 2015.

Read this article and all my other articles for free on Benzinga by clicking here

Want to learn more about the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common SenseI don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and is always available on your local internet!