J.C. Penney May Have Good News -- for Once

Most people end up knowing "That One Guy." The guy who's wasting his potential, living in a rat's nest, and hanging out with his fantasy hockey friends on the weekend instead of getting a haircut. Imagine that one day, you wandered into his house to see that things are looking up. Clean-shaven, relatively tidy living room, and a few interviews lined up. Congratulations, That One Guy, you're on the J.C. Penney (NYSE: JCP  ) redemption path.

J.C. Penney is weighing in later this week when it releases its first-quarter results on Thursday. The market is a little confused about what to expect. Analysts have estimated a loss per share ranging from $0.95 to $1.50, according to the 18 estimates tracked by Yahoo! Finance. So what can investors expect from J.C. Penney this week?

Sales on the rise
Starting at the top, look for an increase in comparable-store sales, which will likely lead to an increase in total revenue, even though the company has closed underperforming locations. The average estimate for revenue in the quarter is $2.7 billion, which would be close to a 2.5% increase over the first quarter of 2013. If revenue does increase, it would be the first instance of top-line growth since early 2011.

An increase would also fit the general trend of J.C. Penney's year-over-year quarterly income changes. During the course of 2013, the company was able to keep getting closer and closer to positive, with sales starting the year down 28.4% compared to the year before, and clawing back to a mere 2.6% decline in the last reported quarter.

That's going to be a long way toward getting J.C. Penney back to earning some money. Top-line sales growth means nothing if it still results in a loss, and pushing promotions to drive an increase in sales isn't sustainable.

The earnings issue
This quarter, J.C. Penney is still looking at a loss, which has been the general trend during the last year -- ignoring the positive result from a tax credit last quarter. The company's cash base is going to continue taking a hit until the ship rights itself. Luckily, J.C. Penney seems to be on the road to operational success as well. Just like revenue, operating margin has been trending up, though it still hasn't turned positive.

J.C. Penney has been focusing on keeping operating costs low, reevaluating the way it invests for its pension obligations, and selling off non-core assets. CEO Mike Ullman has helped deliver positive cash flow and right some of the wrongs that former CEO Ron Johnson heaped on the business.

The bottom line
The results this week aren't going to be miraculous, and J.C. Penney isn't going to put up a positive earnings per share from continuing operations. However, for the first time in a very long time, I think J.C. Penney is going to have good news and an upbeat earnings release. I've never been a huge fan of the stores, but during the last six months, my local J.C. Penney has actually turned into a place worth shopping in. Clean stores, well-stocked shelves, and good prices are all bringing customers back, and Ullman is returning the company to a better place.

I didn't think I'd ever say it, but J.C. Penney looks like a winner to me.

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