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Factors Likely to Affect J. C. Penney's (JCP) Q2 Earnings

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J. C. Penney Company, Inc. is slated to release second-quarter fiscal 2019 results on Aug 15, before market open. The Zacks Consensus Estimate for earnings in the quarter under review stands at a loss of 32 cents. A loss of 38 cents per share was recorded in the year-ago period. The Zacks Consensus Estimate for revenues is pegged at $2,689 million, indicating a decline of roughly 5% from the year-ago quarter’s reported figure.

Let’s see how things are shaping up prior to this announcement.

J. C. Penney Company, Inc. Price and EPS Surprise


Factors Affecting the Stock

J. C. Penney has been witnessing dismal sales for a while now. This can be attributable to persistent loss of customers due to continuous failed attempts to introduce fashion trends. Soft comparable sales are a deterrent as well. These downsides may adversely impact the company’s top line in the upcoming quarter. Notably, soft performance of home, women's accessories and handbags categories hurt the top line in the last reported quarter.

Moreover, the company is facing stiff competition from online retailers. This along with the emerging off-price retailers is a concern for J. C. Penney. Also, the sudden exit of key executives led to change in leadership positions. Although the company has appointed new management to get back on track, efforts are yet to bear fruit.

Nevertheless, from focusing on smaller-format stores to bringing in a new loyalty program, to embracing new technologies and providing fast delivery options, J. C. Penney has been looking at every nook and cranny to improve performance. Notably, the company is engaging in better pricing, enhancing omnichannel capabilities and introducing unique products. Markedly, the company has tested new centralized pickup and returns area, and is on track to expand this concept across its stores. Also, it is focusing on optimizing its inventory level. Such efforts are likely to support the stock in the second quarter.

This move will help enhance the in-store experience and provide a better omnichannel experience to customers.

What Does the Zacks Model Say?

Our proven model does not conclusively show that J. C. Penney is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

J. C. Penney has a Zacks Rank #4 (Sell) and an ESP of -32.28%. We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks With Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Burlington Stores BURL has an Earnings ESP of +0.35% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target Corporation TGT has an Earnings ESP of +1.04% and a Zacks Rank #2.

L Brands LB has an Earnings ESP of +0.89% and a Zacks Rank #3.

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