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J.C. Penny Releases Q1 2014 Earnings on May 15, 2014

May 14, 2014 | About:
Karen Rogers

Karen Rogers

1 followers

J.C. Penny Company Inc. (JCP) will release its first quarter 2014 earnings after the bell at 4:00 p.m., EST, on Thursday, May 15, 2014. A live conference call and webcast will start at 4:30 pm, EST, after the earnings release. The webcast is available at the J.C. Penny investor relations website here. J.C. Penny is one of the largest retail chains with over 1,000 stores that specialize in apparel and home furnishings and carries a general line of merchandise.

Analysts Expect:

  • EPS ranging from -$1.52 to -$0.91 with a target of -$1.25.
  • Revenue ranging from $2.6 billion to $2.8 billion with a target of $2.7 billion.

Last quarter J.C. Penny surprised analysts when the EPS came in at $0.11 instead of -$0.79 as expected. The company cut costs by reducing SG&A expenses by 17% to $1.074 million and posted a positive cash flow. J.C. Penny sold off unpopular product inventory lines in favor of stocking merchandise that customers wanted to buy. To improve liquidity, the company has closed 33 underperforming stores since January 2014, and closed or scaled back its unprofitable home furnishings department.

However, J.C. Penny’s gross margin of 28.4% still trails behind its competitors. The company estimates its 2014 EBITDA at $307 million, which is not enough to cover the debt interest and capital expenditures of approximately $643 million. For 2015, the estimated gross margin is 39% and EBITDA is $1.171 billion. But since the sales growth for 2015 is estimated at 3%, an EBITDA of $750 million is a more realistic assumption.

Revenue

Q4 2014

Q3 2013

Q2 2013

Q1 2013

Estimate

3.9B

2.8B

2.8B

2.6B

Actual

3.8B

2.8B

2.7B

2.6B

Difference

-100M

+0.00

-100M

+0.00

Despite the dramatic improvements, J.C. Penny continues to post negative EPS figures over consecutive quarters. The company has posted smaller than expected losses but has not been able to push the EPS into positive territory yet.

EPS

Q4 2014

Q3 2013

Q2 2013

Q1 2013

Estimate

-0.89

-1.77

-1.14

-0.96

Actual

-0.68

-1.81

-2.16

-1.31

Difference

-0.21

-0.04

-1.02

-0.35

Competitors

J.C. Penny’s primary competitors are Kohl’s Group (KSS) and Macy’s Inc. (M). While the retail sector has suffered from the economic slowdown, J.C. Penny is the only company still posting negative EBITDA and net income. The company’s revenue and gross margins continue to lag behind Kohl’s and Macy’s.

Revenue

JCP

KSS

M

Price

9.20

55.58

57.66

Market Cap

2.68B

11.42B

20.68B

Revenue (TTM)

11.86B

19.03B

27.93B

Net Income (TTM)

-1.39B

889M

1.49B

Qtr. Rev. Growth

-0.03

-0.04

-0.02

EBITDA

-733M

2.63B

3.78B

Trade Considerations

Analysts are very bearish on J.C. Penny and expect the company to continue underperforming. The stock hit a high of $42.68 on Feb. 13, 2012, and has been in a downtrend ever since. However, there are signs that J.C. Penny’s turnaround strategy is starting to pay off. The stock broke through the $9.00 resistance barrier after posting unexpectedly strong fourth quarter 2014 earnings. The number of shares held short has decreased 2.66% from 93.33 million shares on March 31, 2014, to 90.89 million shares on April 30, 2014. If the company continues posting improved numbers, analysts may upgrade J.C. Penny to a buy.


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