Earnings Preview: J. C. Penney

J. C. Penney Company Inc. (JCP - Analyst Report) is slated to report its second-quarter 2012 financial results on August 10, 2012. The current Zacks Consensus Estimate for the quarter reflects a loss of 24 cents a share (indicating a sharp decline from the year-ago quarter) on revenues of $3,172 million.

First-Quarter Recap

J. C. Penney, which competes with Macy’s Inc. (M - Analyst Report) and Kohl’s Corporation (KSS - Analyst Report), posted quarterly loss of 25 cents a share compared with earnings of 36 cents in the year-ago quarter. Analysts polled by Zacks expected the company to post a loss of 11 cents.

Despite delivering a disappointing bottom line, management reiterated its fiscal 2012 earnings guidance at $2.16, excluding markdowns, restructuring charges and non-cash qualified pension expense.

The quarterly sales of $3,152 million dropped 20.1% from the prior-year quarter, and fell short of the Zacks Consensus Estimate of $3,443 million.

(Read our full report at J. C. Penney Plunges, Div Shelved)

Agreement of Estimate Revisions

Over the past 30 days, 4 out of 12 estimates have been revised downwards, while none were raised for the second quarter. Moreover, for fiscal 2012, 3 out of 10 estimates have been revised in the downward direction.

Over the last 7 days, 2 out of 12 estimates have been revised downwards, while none were raised for the upcoming quarter. Moreover, for fiscal 2012, 1 out of 10 estimates has been revised downwards, while none moved in the opposite direction.

The downward pressure on earnings estimates was in response to the company’s dismal performance and uncertainty hovering over its growth plan. J. C. Penney has been struggling against other retail chains, despite of an array of measures taken to uplift its operations. Moreover, an erratic consumer behavior and a sluggish economic recovery still remain matters of concern.

Magnitude of Estimate Revisions

Given the downward estimate revisions, the Zacks Consensus Estimate of loss for the second quarter widened by 8 cents and 4 cents in the last 30 and 7 days, respectively.

For fiscal 2012, estimates went down to 94 cents from $1.41 over the last 30 days, while it decreased 13 cents in the last 7 days.

Surprise History

With respect to earnings surprises, J. C. Penney has topped as well as missed the Zacks Consensus Estimate over the last four quarters in the range of negative 127.3% to positive 250%.

Our Take

J. C. Penney’s lackluster performance set the company back while many of its peers reported impressive numbers. With the hiring of Ron Johnson and the ongoing efforts for a complete makeover, J. C. Penney has been striving to attract customers. However, it has proven a tall task for the company.

Currently, we have a long-term Neutral recommendation on the stock. However, J. C. Penney holds a Zacks #5 Rank that translates into a short-term Strong Sell rating.