Q4 Preview: J.C. Penney (JCP) Investors Expect Bad Results But Remain Enthusiastic Over New News

Shares of J.C. Penney Co. (NYSE: JCP) are trading up roughly 0.5 percent Thursday ahead of the release of its fourth-quarter results before the opening bell on February 24rd.

The Wall Street quarterly consensus for J.C. Penney is $0.68 per share in earnings on $5.5 billion in revenue. During the fourth quarter of last year, the company reported earnings of $1.09 per share on $5.7 billion in total sales. The company’s guidance range calls for $0.65-$0.70 in earnings per share.

For the full year 2011, analysts on the Street are currently estimating earning of $1.21per share on $17.33 billion in total sales.

The fourth quarter conference call is scheduled for 8:00 am ET on February 24, 2012. Dial (866) 519-1043 for domestic callers or (585) 295-5443 for international.

According to data from Bloomberg, shares of J.C. Penney have six Buy ratings, eight Hold ratings and three Sell rating. The average price target on shares of JCP is $58 with a range from $46 to $67.

Analyst Comments:

• Goldman Sachs forecasts the company's earnings will miss expectations for the quarter by $0.06 as the company was likely aggressive in its efforts to reduce inventory levels. On that note, gross margins may come in 2.2 percent lower on a year-over-year basis.
  
  Although Goldman doesn't anticipate management will provide any future fiscal 2012 guidance, they said any new initiatives or news announced will trump the quarter’s results.
  
  Goldman is reiterating its Neutral rating on the stock going into the release.
  
  
• JPMorgan estimates earnings will meet the bottom end of the company’s guidance as same store sales fall 1.8 percent. The firm also estimates gross profit margins will contract by 420 basis points to 33.4 percent.
  
  An analyst at JPMorgan reports, "Taking a deep dive approach, we have built a bottom-up roadmap for the top line and margin opportunity over the next five years and believe the story at J.C. Penney is not broken, but constrained. Looking ahead, change will likely take time, and investment risk is elevated into 1H12 given disruption around the new pricing/promotional structure, but believe new management can stabilize the ship in 2H12 and see the opportunity for 20-25% EPS growth from 2012-2015 and longer term EPS potential of $5.00+."
  
  JPMorgan is reaffirming its Overweight rating and $49 price target on the stock ahead of the quarterly results.
  
  
• Deutsche Bank predicts earnings will total $0.67 per share for the quarter as same store sales only decline by 0.5 percent.
  
  "We applaud JCPenney's new management team for thinking outside of the box and courageously moving to the 'Fair & Square' pricing model, which we find intriguing," states an analyst at Deutsche. "Looking ahead, while the stock probably has a 6 month free pass, we believe management will need to begin showing signs of top-line improvement by the third quarter."
  
  Deutshe Bank is maintaining its Hold rating and $40 price target going into the fourth quarter results and conference.

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