The Day After: Three Top Analysts Recap JC Penney's Narrower-Than-Expected Q1 Print

May 14, 2015 9:44 AM | 2 min read | Make a Comment
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J C Penney Company IncJCP
reported its
first quarter results on Wednesday after market close. Here is a recap of what three of Wall Street's top retail analysts had to say. Credit Suisse: JC Penney Continued To Make Progress Michael Exstein of Credit Suisse commented in a note that JC Penney continued to make progress in the quarter, evidence by a total sales growth in-line with his expectations while delivering improvements in EBITDA and SG&A dollars. However, the largest challenge facing the company moving forward isn't further margin improvements, but growth in total sales. The task may be difficult given a low productivity store base but through expense reduction, disciplined capex and potentially deleveraging could yield favorable results. Nevertheless, the analyst maintained an Underperform rating with an unchanged $7 price target. Deutsche Bank: Only Gets More Difficult Paul Trussell of Deutsche Bank commented in a note that JC Penney continues to produce "meaningful" gains as part of a turnaround effort. However, with continued improvements comes higher expectations, especially after the company's April sales update. Trussell noted that he has a cautious view on the company's ability to drive mid-single digits comp gains on a go-forward basis as well as the recognition of tougher gross profit margins compares ahead. The analyst admitted that he is giving JC Penney the benefit of the doubt in fiscal 2015 in its ability to "clawback" $300 million of EBITDA, he disagrees with the notion it can make equal progress in fiscal 2016 and 2015 without having the tailwind of fixing prior mishaps. Shares remain Hold rated with an unchanged $9 price target. Citigroup: Increased Guidance, Outlook Jenna Giannelli of Citigroup commented in a note that following JC Penney's results, the company increased its guidance and now expects a higher same-store sales, gross margin and SG&A results compared to prior indications. According to Giannelli's estimates, JC Penny is now expected to report full year sales, gross margin, and EBITDA of $12.7 billion, 35.9 percent and $608 million, respectively. However, the analyst is making no changes to her prior free cash flow expectations given a higher modeled capex and a smaller working capital inflow. Despite several improving outlooks, the analyst is maintaining a "more cautious sentiment" given a cautious view of longer-term revenue, margin and EBITDA objectives. Shares remain Market Perform rated.
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Posted In: Analyst ColorAnalyst RatingsCitigroupCredit SuisseDeutsche Bankjc penneyJenna GiannelliMichael ExsteinPaul Trussellretailers
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