Will J.C. Penney Recreate Last Quarter's Impressive Results?

J.C. PenneyJCPRelated: J.C. Penney First Quarter Conference Call Summary On Wednesday, Macy's M reported a disappointing second quarter results with a revised guidance. Naturally, this would make some J.C. Penney investors nervous.

JPMorgan: Investors should be nervous

Matthew Boss of JPMorgan stated that J.C. Penney's roadmap “remains highly uncertain” with a loss of its “core” customers and margins roughly 800 basis points below 2006 levels. “Importantly, CEO Mike Ullman's stabilization game-plan is underway driven by a (1)return to couponing/promotions, (2) re-established high-low-pricing to stem the GPM decline (down 600 basis points in fiscal 2012), and (3) balance sheet reducing Capex,” Boss wrote in a note to clients on August 11. Boss adds that it is unlikely J.C. Penney will match its 2006 peak sales productivity of $193.9 per square foot, but a return to $150 per square foot as seen in fiscal 2010 and fiscal 2011 is a “more reasonable base-line goal.” Finally, Boss states that a return to mid-single-digit EBIT margins is years away. Boss is expecting J.C. Penney to lose $1.00 per share in the second quarter, an improvement over a previous $1.17 loss the analyst previously expected. Revenue is projected to be $2.774 billion. Shares are Buy rated with a $9.00 price target.

Belus Capital Advisors: Expect a bottom line beat

Former J.C. Penney bear turned believer Brian Sozzi of Belus Capital Advisors believes that J.C. Penney could surprise investors with a bottom line beat in its second quarter results. In a note to clients on Wednesday, Sozzi stated that J.C. Penney will demonstrate improvements in its turnaround plan. “J.C. Penney is prepping to unleash full-year guidance (though not actually Macy's type growth here), and a series of positive comments from CEO Mike Ullman on the loss per share call.” Sozzi uses a “boots on the ground” approach to his analysis. The analyst saw first hand that the company is selling more merchandise at promotional prices than clearance prices, which could result in a gross margin improvement. Sozzi also states that risks are like to continue to recede that J.C. Penney will be forced to partake in another dilutive share offering in 2015 or other harmful shareholder actions. Shares are Hold rated with a $9.50 price target and no estimates for the second quarter.