JCPenney Earnings Should Make You Run to Sell JCP Stock

by Louis Navellier | February 27, 2014 10:53 am

Welcome to the Stock of the Day.

JCPenney185[1]On an otherwise lukewarm day for the markets, one of Wednesday’s biggest winners may surprise you. J.C. Penney (JCP[2]) beat earnings expectations [3]so shares gapped up during the course of the day, and continue to rally Thursday morning.

The company has been struggling lately, but could the latest earnings report signal better times to come for the retailer? Find out today.

Company Overview

With over 1,100 locations and 116,000 employees, J.C. Penney is one of the largest department store chains in the United States. The company is known for stocking clothing, electronics and housewares at mid-range price levels and keeping most of its locations based in suburban shopping malls.

In addition to its conventional merchandise, J.C. Penney also houses several leased departments like Sephora cosmetics, an assortment of restaurants as well as portrait studios.

Earnings Buzz

Shares of JC Penney surged after the retailer reported net earnings of $35 million for the fourth quarter. The company’s bottom-line was helped by tax gains. Excluding items, J.C. Penney posted a loss of $206 million, or 68 cents per share. Analysts forecast a loss of 85 cents per share, so JCP beat expectations. Even so, holiday sales came in below expectations—net sales slid to $3.78 billion compared with the $3.85 billion consensus estimate.

Future Outlook

While investors are celebrating the fact that J.C. Penney’s loss narrowed, FY 2015 still isn’t looking good for the department store player.

In fact, excluding tax benefits, J.C. Penney is expected to be in the red through the end of FY 2016! To add insult to injury, the analyst community has been steadily revising their EPS estimates down over the past 90 days.

Meanwhile, sales are estimated to grow in the low single-digits over the next two years. So I wouldn’t recommend JCP for new money anytime soon.

Current Ratings

Before you buy any stock, you should always run it through my free Portfolio Grader[4] ratings system. Over the past several quarters, the company has released round-after-round of earnings results so JCP’s Fundamental Grade has plunged to a D. J.C. Penney manages D- or F-grades for four of its eight fundamental metrics, including sales growth, earnings momentum, cash flow and return on equity.

The company receives Cs for the other four metrics. To top it off, buying pressure for this stock is very weak, so JCP receives an F for its Quantitative Grade.

Bottom Line: As of this posting I consider JCP an F-rated Sell.

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