Nomura Upgrades JC Penney, Sees Profitability In '17

The share price of J C Penney Company Inc JCP has appreciated 15.28 percent year-to-date, although the stock has seen its fair share of ups and downs through the year.

Nomura’s Robert Drbul has upgraded the rating on the company from Reduce to Neutral, while raising the price target from $8 to $9.

Drbul also listed JC Penney among the top performing stocks in Nomura’s "broadline and department store" coverage universe.

Analyst Robert Drbul mentioned the company has multiple opportunities for top line growth, as well as margin expansion under the leadership of its new CEO, Marvin Ellison, especially after the multi-quarter comp declines and the sales volume loss of $4 billion in 2012-2013 under CEO Ron Johnson.

“We also see opportunity from an interest expense perspective as the company works to reduce the debt load,” Drbul went on to say.

Related Link: UPDATE: Nomura Sharply Increases FY17 EPS Estimate On JCP

Continued Optimism

Drbul also expressed optimism regarding the macro environment in the United States, while stating that the consumer was now in a better position to spend. On the other hand, square footage growth trends are expected to continue to slow in 2016, while investment in ecommerce is likely to continue to rise.

“We believe retailers will continue to work through elevated year-end inventory levels and expect an improved supply/demand equation to ensue in 2016,” Drbul added.

According to the Nomura report, JC Penney is expected to achieve profitability by 2017, and the EPS estimate for 2017 has accordingly been raised from $0.00 to $0.35.
Image Credit: By Michael Rivera (Own work) [CC BY-SA 3.0], via Wikimedia Commons

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