Is J.C. Penney (JCP) Flashing an Ominous Sign?

July 23, 2012 11:30 AM EDT
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Price: $6.85 +2.39%

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    12 Buy, 14 Hold, 8 Sell

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Shares of J.C. Penney (NYSE: JCP) are bucking the broader market trend Monday morning, trading 1.5 percent high, but are investors overlooking a possible ominous sign for more pain to come. According to one analyst this could be something to watch.

While today's deal to monetize $248 million iin real estate assets is in-line with efforts to monetize non-core assets, the aciton comes just 3 months after the company eliminated its dividend. This leads analysts at Deutsche Bank to wonder "if the additional liquidity was needed to buffer weak fundamental retail results." Regardless, it raises eyebrows they said.

The firm notes that the cash proceeds equate to an amount approximately 20 percent below the current market value of Simon Property Group (NYSE: SPG) stock, which may be due to a discounted sale or other costs/taxes associated with the redemption.

At the end of April 2012, the company had $839 million in cash and cash equivalents, down from $1.767 billion the prior year.

J.C. Penney is scheduled to reports second quarter results on August 10th.

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