J C Penney Company, Inc. (NYSE:JCP) is scheduled to release its next earnings report tonight after closing bell. On average, analysts are expecting losses of 93 cents a share on $2.78 billion in revenue. According to Zacks, there has been a number of upward earnings revisions from analysts. As a result, investors may think an earnings beat is on tap for tonight.

J C  Penney Company JCP

What to expect in J C Penney’s earnings report

In the previous quarter, the department store chain reported a 6% increase in revenues year over year, which was the first increase since May 2011, according to one Seeking Alpha contributor. The one bad spot in that earnings report was negative cash flow from operations, however, and analysts have been keeping a close eye on J C Penney’s cash burn.

The retail chain’s cash flow problem has been improving gradually, but cash flow from operations is still negative. Many would argue that cash flow and cash burn are two of the biggest problems. If J C Penney can post positive cash flow from operations for a quarter, Seeking Alpha contributor Brian Gilmartin said it would be a big positive.

Positives for J C Penney

He added that there are a number of good things and bad things about J C Penney right now. For example, the retail chain has returned to revenue growth. However, it must sustain the growth in order to keep investors interested. In addition, he said the department store chain has stabilized its gross margin. In the last quarter, it was 33%, although in “normal times,” he says, it should be between 38% and 40%.

He also said that J C Penney’s charts have improved, with shares climbing higher than their 50-day and 200-day moving average. In addition, he notes that the company has seen positive trends on its ecommerce side.

Negatives for J C Penney

On the other hand, operating cash flow remains negative, although hit is improving. He thinks J C Penney might be able to generate cash flow from operations by the end of the current calendar year. Management is trying to hit break even in free cash flow by the end of this year, which he thinks is “pretty aggressive.”

And then there is continuing pressure from big retailers and ecommerce giants like Amazon.com, Inc. (NASDAQ:AMZN). Also J C Penney is adding stores while also contracting its store base, which will boost cash flow, but he notes that retailers in general need to grow their numbers of stores.