J. C. Penney Company, Inc. (JCP) is slated to report third-quarter fiscal 2013 results on Nov 20, 2013. In the last quarter, it posted a negative surprise of 91.2%. Let us see how things are shaping up for this announcement.
Factors this Past Quarter
J. C. Penney has been in troubled waters for quite some time and is grappling with waning revenues and higher losses. The company’s restructuring initiatives have been crumbling as it is exhibiting no signs of improvement. The company remained in the red with adjusted loss per share of $2.16 in the second quarter of fiscal 2013. The quarterly sales of $2,663 million fell 11.9% year over year.
Our proven model does not conclusively show that J. C. Penney is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Negative Zacks ESP: ESP for J. C. Penney is -4.84%. This is because the Most Accurate Estimate is -$1.95 and the Zacks Consensus Estimate is -$1.86.
Zacks Rank #3 (Hold): J. C. Penney’s Zacks Rank #3 (Hold) lowers the predictive power of ESP. The Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
Hanesbrands Inc. (HBI) with Earnings ESP of +1.11% and a Zacks Rank #1 (Strong Buy)
Lumber Liquidators Holdings, Inc. (LL) with Earnings ESP of +1.39% and a Zacks Rank #2 (Buy)
Michael Kors Holdings Limited (KORS) with Earnings ESP of +1.16% and a Zacks Rank #2 (Buy)