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Why J. C. Penney (JCP) is a Good Pick for Your Portfolio
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You must take a look at department store retailer J. C. Penney Company, Inc. as this stock has all that’s needed to grab a spot in one’s portfolio. Right from its solid fundamentals to stock price movement and earnings history, J. C. Penney has it all to catch investors’ eye. Notably, the stock has jumped over 67% year to date. So, let’s take a deeper look at what’s leading to the bull run for this Texas-based company.
The stock appears compelling from the earnings perspective. J. C. Penney recently posted better-than-expected bottom-line results for second-quarter fiscal 2016. Notably, this Zacks Rank #2 (Buy) company’s bottom line has outperformed the Zacks Consensus Estimate for six straight quarters now, by an average of 38.1%. Moreover, the company has a long-term earnings growth rate of 16%.
The company recorded adjusted loss of 5 cents a share in the second quarter of fiscal 2016 that was narrower than the Zacks Consensus Estimate of a loss of 15 cents. Further, both top and bottom lines improved year over year in the reported quarter. (Read: J. C. Penney Q2 Loss Lower than Expected, Sales Lag)
Additionally, comparable-store sales (comps) trended upward, with a sequential improvement witnessed in every month. This was backed by strong in-store and online businesses, and solid performance across most merchandising divisions, with Sephora being one of the top performers.
The Sephora stores form part of J. C. Penney's long-term strategy to gain a competitive advantage over other beauty product retailers and drugstores. Further, the company has started selling Sephora products online, with the intent to add more stores.
Also, J. C. Penney has taken up several strategic initiatives to drive traffic. The company, in order to enhance customer shopping experience, has been focusing on remodeling, renovating and refurbishing its stores with special focus on enhancing the high-margin center core department that houses handbags, fashion accessories, sunglasses and fashion jewelry. It also continues to work on improving its omni-channel reach.
All the abovementioned factors are likely to help the company boost sales and EBITDA in the remainder of fiscal 2016. Also, management is concentrating on lowering the debt level and expects to reduce its net debt to EBITDA ratio to less than three times by fiscal 2017.
Following the company’s robust earnings, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 have trended upward in the last 7 days. The estimate for fiscal 2016 increased 4 cents to 9 cents, while the estimate for fiscal 2017 was up 3 cents to 64 cents.
We believe J. C. Penney’s efforts to further the reach of national and especially private-label brands through effective marketing campaigns and point-of-sale technology initiatives, will help improve gross margins. Also, the company is expanding its Home business by integrating an appliance showroom with approximately 500 outlets and online at jcp.com.
Stocks that Warrant a Look
Other favorably ranked stocks in the retail space include Macy's, Inc. (M - Free Report) , The Children's Place, Inc. (PLCE - Free Report) and American Eagle Outfitters, Inc. (AEO - Free Report) , all carrying a Zacks Rank #2.
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Why J. C. Penney (JCP) is a Good Pick for Your Portfolio
You must take a look at department store retailer J. C. Penney Company, Inc. as this stock has all that’s needed to grab a spot in one’s portfolio. Right from its solid fundamentals to stock price movement and earnings history, J. C. Penney has it all to catch investors’ eye. Notably, the stock has jumped over 67% year to date. So, let’s take a deeper look at what’s leading to the bull run for this Texas-based company.
The stock appears compelling from the earnings perspective. J. C. Penney recently posted better-than-expected bottom-line results for second-quarter fiscal 2016. Notably, this Zacks Rank #2 (Buy) company’s bottom line has outperformed the Zacks Consensus Estimate for six straight quarters now, by an average of 38.1%. Moreover, the company has a long-term earnings growth rate of 16%.
PENNEY (JC) INC Price and Consensus
PENNEY (JC) INC Price and Consensus | PENNEY (JC) INC Quote
The company recorded adjusted loss of 5 cents a share in the second quarter of fiscal 2016 that was narrower than the Zacks Consensus Estimate of a loss of 15 cents. Further, both top and bottom lines improved year over year in the reported quarter. (Read: J. C. Penney Q2 Loss Lower than Expected, Sales Lag)
Additionally, comparable-store sales (comps) trended upward, with a sequential improvement witnessed in every month. This was backed by strong in-store and online businesses, and solid performance across most merchandising divisions, with Sephora being one of the top performers.
The Sephora stores form part of J. C. Penney's long-term strategy to gain a competitive advantage over other beauty product retailers and drugstores. Further, the company has started selling Sephora products online, with the intent to add more stores.
Also, J. C. Penney has taken up several strategic initiatives to drive traffic. The company, in order to enhance customer shopping experience, has been focusing on remodeling, renovating and refurbishing its stores with special focus on enhancing the high-margin center core department that houses handbags, fashion accessories, sunglasses and fashion jewelry. It also continues to work on improving its omni-channel reach.
All the abovementioned factors are likely to help the company boost sales and EBITDA in the remainder of fiscal 2016. Also, management is concentrating on lowering the debt level and expects to reduce its net debt to EBITDA ratio to less than three times by fiscal 2017.
Following the company’s robust earnings, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 have trended upward in the last 7 days. The estimate for fiscal 2016 increased 4 cents to 9 cents, while the estimate for fiscal 2017 was up 3 cents to 64 cents.
We believe J. C. Penney’s efforts to further the reach of national and especially private-label brands through effective marketing campaigns and point-of-sale technology initiatives, will help improve gross margins. Also, the company is expanding its Home business by integrating an appliance showroom with approximately 500 outlets and online at jcp.com.
Stocks that Warrant a Look
Other favorably ranked stocks in the retail space include Macy's, Inc. (M - Free Report) , The Children's Place, Inc. (PLCE - Free Report) and American Eagle Outfitters, Inc. (AEO - Free Report) , all carrying a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>