Please ensure Javascript is enabled for purposes of website accessibility

Shares of J.C. Penney Company, Inc. Fly 12% Higher After an Encouraging Quarter

By Daniel Miller - Feb 26, 2016 at 2:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

J.C. Penney's fourth quarter was a good one, and comparable-store sales look promising. However, the turnaround still has a long road ahead for investors.


Image source: J.C. Penney Company 2014 annual report. 

What: Shares of J.C. Penney Company (JCPN.Q), one of the nation's largest apparel and home furnishing retailers, are up 12% Friday afternoon, with investors apparently encouraged that the company's turnaround has taken positive steps forward.

So what: Revenue moved 3% higher to $3.99 billion during the fourth quarter, slightly ahead of analyst estimates. Better yet, the company reported a 4.1% increase in comparable-store sales, which was a pleasant departure from the dark days of just a few years ago. The bottom line was a little more complicated, but investors found the results to their liking.

On one hand, J.C. Penney lost $131 million, or $0.43 per share during the fourth quarter, which compares unfavorably to the loss of $35 million, or $0.11 per share, from a year ago. However, investors shrugged that off because much of that widening loss was a result of restructuring and pension costs. When adjusting for those, its adjusted earnings per share checked in at $0.39 per share which was in line with what analysts expected.

Now what: As the company continues to trudge along its turnaround story, which is looking brighter each quarter, it expects comparable-store sales to jump another 3% to 4% during 2016. It also forecasts an increase of 40 to 60 basis points in gross margin and for selling, general, and administrative costs to decline compared to last year.

JCP Chart
JCP data by YCharts.

Management also expects its EBITDA to reach $1 billion in 2016, adjusted EPS to be positive, and free cash flow to improve compared to last year. Those are all good business factors for a company nearly left for dead a few years ago, though it still has a long way to go before its stock price recovers from its downward spiral over the years.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

J. C. Penney Company, Inc. Stock Quote
J. C. Penney Company, Inc.
JCPN.Q

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.