Based on results from their fourth quarter reports, it might appear that J.C. Penney Company, Inc. (NYSE:JCP) is starting 2014 off on the right foot. Sales at locations open for at least a year actually rose 2% over the quarter and CEO Mike Ullman has turned overall sales around by reviving popular private-label brands and coupons that were once banned by former CEO Ron Johnson.
However, despite the somewhat encouraging fourth quarter numbers, top analysts are not convinced that 2014 is the year of J.C. Penney and they are recommending SELL J.C. Penney Company, Inc. (NYSE:JCP).
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J.C. Penney JCP
Wells Fargo analyst Paul Lejuez called the department store’s Q4 results, “nothing to celebrate”, recommending SELL JCP. Paul said, “as much as we’d like to be excited about their first positive comp since FQ2 2011, against a down 32% comp in FQ4 2012 on top of a down 2% comp in FQ4 2011, this +2% today is nothing to celebrate. There is no change to our FY2013E but we are reducing our FY2014E from -$3.93 to -$4.37.” And despite ending the quarter with almost $2 billion in liquidity, Paul believes, “that over the next three quarters, between operating losses, inventory build, and capex, the company will burn through cash of $1.3-$1.5B.” Paul is ranked number 10 out of 2381 analysts and has a 4.9% average return over S&P-500 with a 67% success rate of recommended stocks
Analyst Brian Sozzi of Belus Capital also acknowledged JC Penney’s favorable fourth quarter results. However, Brian felt that the numbers were not a strong enough sign that the company is strengthening, leaving him to also advise SELL JCP. While the results mark the first time a positive comp has appeared since the second quarter of 2011, Brian “is not convinced that JC Penney has demonstrated it is in the early stages of a turn-around.” Brian is relying on “the raw operating cash flow figure, which will shed light on whether JC Penney’s operations have normalized or if another penalizing cash raise is likely in 2014.” Brian is ranked number 60 out of 2381 analysts with a 5.7% average return over S&P-500.
Morgan Stanley analyst Kimberly Greenberger also supported the theory that JC Penney’s results do not prove the company is back on track, recommending SELL J.C. Penney (NYSE:JCP) as well. “The month-to-month deceleration undermines the rapid recovery thesis. Sales need to accelerate to meet our below consensus forecast, which yields $700M 2014 cash burn and negative FCF until 2016.” Kimberly has a 0.9% average return over S&P-500.
JC Penney might have been excited about their encouraging fourth quarter results, but these top analysts were not convinced. To continue following analyst recommendations about JCP, as well as recommendations about other companies, download TipRanks, and start making informed financial decisions today.
