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JCP Stock: Q4 Earnings Will Push It Higher

The risk-reward factor makes JCPenney an attractive (albeit speculative) candidate

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JCPenney (JCP) reports Q4 earnings Wednesday after the close, and JCP stock needs some good news — it hasn’t traded this low since 1980, over 33 years ago.


Profits aren’t on the radar, but hopefully revenues show the damage inflicted by Ron Johnson’s short reign as CEO is mostly behind the company.

Investors knew Mike Ullman’s turnaround wasn’t going to be easy. Since his hiring in April 2013, Ullman has gone to work righting the ship. The Q4 JCPenney earnings report should tell us how much further the recovery needs to go for JCP stock to move back into the teens. Down 43% year-to-date through Feb. 25, any good news should push investors to buy JCP stock — but that’s a big if.

It won’t be easy, but the current and former CEO knows a thing or two about running this company.

Q4 JCPenney Earnings Expectations

JCPenney is expected to deliver Q4 revenues of $3.86 billion on positive same-store sales growth of 2%, its first positive comparable since early 2011. Goldman Sachs was looking for 4% same-store sales growth based on a strong 10% increase in November. The fact it didn’t hit 4% means its sales are slowing faster than expected.

JCPenney reported these preliminary sales numbers in early February, however, so this shouldn’t affect JCP stock too much.

On the other hand, we don’t really know just how much it’s going to lose in Q4. Estimates vary from a high of $6.56 per share to a low of $5.60. The big question mark has to do with its promotional selling. Dillard’s (DDS) reported quarterly earnings of $2.69 per share on Monday, 30 cents short of analyst expectations. The cause: markdowns, which a lot of retailers employed over the holiday season in order to generate revenue. Dillard’s achieved 2% positive comps as a result of the markdowns, but at a very steep cost.

JCPenney looks to be headed down that very same road which isn’t good for gross margins, earnings and most especially JCP stock.

What Will Drive JCP Stock Higher? 

Clearly a lot has to go right during the next 12 to 18 months for JCP to climb out of the hole it’s in. Here are five things absolutely essential to JCP stock moving higher:

Article printed from InvestorPlace Media,

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