Evercore ISI Upgrades JC Penney To Buy, Highlights 'Accelerating Outperformance'

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Evercore ISI’s Omar Saad upgraded the rating for J C Penney Company Inc JCP from Hold to Buy, while raising the price target from $8 to $15, after the company beat expectations amid a challenging and volatile environment.

Analyst Omar Saad commented that JC Penney’s recent outperformance versus department store and specialty peers inspires confidence in sales, margin, and FCF continuing to improve significantly, allowing the company to create substantial shareholder value via both earnings growth and financial deleveraging.

JC Penney has been able to sustain the momentum over the past couple of quarters, even as the apparel retail group has been under significant pressure. “Moreover, we are confident in the company’s ability to sustain positive comps given JCP is still in the early stages of bouncing off its sales productivity lows with several initiatives to help drive sales,” Saad mentioned.

There could be 40-50 percent upside in JC Penney’s shares over the next 1-2 years, since the continued recovery in sales and earnings should allow the company to meet, or exceed, its debt reduction targets, the analyst said. He added that even if the company was unable to generate significant earnings growth, it would be able to pay down nearly $1 billion of debt by the end of 2018.

The EPS estimates for 2016 and 2017 have been raised from $(0.03) to $0.15 and from $0.64 to $0.80, respectively.

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Posted In: Analyst ColorLong IdeasUpgradesPrice TargetAnalyst RatingsTrading IdeasEvercore ISIOmar Saad
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