Investor Beat, Feb. 27, 2014

J.C. Penney earnings for the fourth quarter are out, with the stock absolutely exploding upward 25% on the news that the company was profitable in Q4 -- at least on paper.

In the lead story from Thursday's Investor Beat, host Chris Hill and Motley Fool analyst David Hanson break down the report and look at J.C. Penney's prospects from here. David notes that a tax asset can be credited as the main reason for the profit this quarter, and that the report was still terrible. While same-store sales were up 2% from last year, 2013 was such an awful year for the company that it wasn't a high benchmark to beat.

Some investors have been looking at Penney as an extremely cheap value play today that only needs to improve slightly for investors to turn a profit. David, however, just sees too many headwinds here for him to want to be involved.

Then, Noodles & Company saw shares fall today after the company reported earnings, missing expectations on both profit and revenue. The stock shot up 70% on its first day of trading last summer, when it IPO'd amid enthusiasm over stocks in the fast-casual dining space, but the company may just be falling back down to reality. David says the business of fast casual just isn't as easy as the market thinks it is. Noodles & Company isn't founder-run like some of the other extremely successful businesses in this space, and it's valued at a shocking 70 times next year's earnings. To David, this company just lacks the same prospects as a Panera Bread or a Chipotle Mexican Grill, and the valuation is far too overenthusiastic.

Also, shares of eBay hit an all-time high today, after the company fired back at well-known billionaire and activist investor Carl Icahn. eBay's chairman came out and said that Icahn's statements earlier this week were "false and misleading," after Icahn called on the company to spin off the PayPal segment of its business. Chris and David look at whether spinning off PayPal would unlock value for shareholders, and whether it makes sense for eBay. While David sees it as something that could happen one day down the road, he's taking eBay's side for the time being, saying that for now, it makes sense for the eBay and PayPal to stick together.

And finally, David tells investors why Coca-Cola is a stock he's putting on his watchlist today. David looks at the phenomenal business of Coca-Cola and its legendary supply chain, but he notes that the stock itself has been largely flat over the past year despite the market gains. That's made him sit up and take notice that this might be a great business that's coming back down to a fair price.

However, many investors are worried about the secular decline in popularity of sugary carbonated sodas in the United States. David says that while that may be a slight concern, the popularity of those beverages isn't going to vanish anytime soon, and in the meantime, Coke has some incredible purchasing power to acquire other great drinks, where it can use its supply chain to make those new brands thrive.

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