J.C. Penney Company, Inc. (NYSE:JCP) is set to release its earnings numbers for the third quarter of 2013 on Wednesday morning before the market opens on Wall Street. The company is in the midst of a rocky recovery and investors are hoping that the company’s third quarter will demonstrate some evidence that the recovery is taking hold.

J.C. Penney JCP

Tomorrow’s earnings report will record the quarter that J.C. Penney Company, Inc. (NYSE:JCP) called the third quarter of financial year 2014. Analysts following the budget retailer are expecting the company to show a loss per share of $1.61 for the three months on revenue totaling $2.8 billion by consensus. The consensus estimates were gathered from a Bloomberg survey of 12 analysts following the company.

J.C. Penny testing recovery

In order to demonstrate recovery on Wednesday morning J.C. Penney Company, Inc. (NYSE:JCP) will need to show investors that it has slowed its revenue decline to 5% or less, and that it has managed to keep its margins at acceptable levels while reducing the sales decline. J.C. Penney Company, Inc. (NYSE:JCP) has been investing heavily in pricing in order to bring customers back inside its stores.

That price investment may result in very low margins at the company, and it may set back recovery expectations even if revenue decline slows to nothing. Revenue stabilization at J.C. Penney Company, Inc. (NYSE:JCP) is a good sign, but it will have no effect if it kills the company’s earnings potential.

J.C. Penney investors expecting strong numbers

Sentiment heading into the release of the J.C. Penney Company, Inc. (NYSE:JCP) earnings numbers was strong, and it appears that investors are expecting a good deal from the report after a tough year for the shares. The company’s stock has gained more than 24% in the month leading up to the release of these earnings numbers. For the entirety of 2013 the firm’s shares have lost more than 55% of their value.

J.C. Penney Company, Inc. (NYSE:JCP) will need to justify the recent rise in its share price to investors tomorrow. Many of those investors are prominent hedge funds who got involved in the company at low prices. They’re not looking from all that much from J.C. Penney Company, Inc. (NYSE:JCP). All they need is stability in order to see a huge return on their buys.