JC Penney Company Inc (NYSE:JCP) has earned an extra shot of confidence from one analyst on the sidelines after holiday comps outclassed expectations with guidance maintained for fiscal 2017. Comps soared up 3.4% throughout the nine-week span of time ending the 30th of December, with home, beauty, and fine jewelry as the standout performers for the consumer goods player. Though women’s remains negative, the business showed a stride in progress with kids scoring the best performance of the apparel categories.
FBR analyst Jeff Van Sinderen notes that though there was “progress in women’s,” there is still “work to do,” yet praises strength in holiday comps soaring past expectations, with home, beauty, fine jewelry impressing the sidelined analyst.
In reaction, the analyst reiterates a Neutral rating on JCP stock while boosting the price target from $3.50 to $4, which implies a 10% upside from current levels. (To watch Van Sinderen’s track record, click here)
Van Sinderen asserts, “Post-holiday inventory is in the best shape since 2014. We feel that the company is being conservative by not raising FY17 guidance, given the comp beat. However, today Sears (SHLD) announced the closing of 64 Kmart and 39 Sears stores with liquidation sales beginning as early as 1/12 and that could present a temporary headwind to JCP in some malls where JCP and Sears are co-tenants.
In the bigger picture, “We continue to believe that a more sweeping shuttering of Sears stores represents an opportunity for JCP to increase market share longer term. We note that the company will receive $50MM for the closure of a leased store that will result in a ~$12MM offset to SG&A this year and ~$38MM in FY19, but plans for other real estate activity remain to be seen for ‘18. We continue to root for JCP management to succeed. However, with ongoing industry headwinds, sustainable progress/improvement in apparel, especially women’s, along with growth in other categories, must materialize,” contends the analyst.
As such, the analyst tweaks his fiscal 2017 projection for EBIDTA from $917 million to $930 million and fiscal 2018 estimate from $982 million to $978 million. Likewise, for EPS, the analyst adjusts his expectations from $0.11 to $0.15 in fiscal 2017 and from $0.20 to $0.23 in fiscal 2018. Additionally, Van Sinderen hikes his fiscal 2017 comp forecast from -0.5% to +0.3% while reiterating his fiscal 2018 comp expectations at +0.5%.
TipRanks indicates caution predominantly races through the Street on JCP stock, with 7 out of 8 analysts polled in the last 3 months hedging their bets with a Neutral rating and 1 issuing a Sell on the stock. Is the consumer goods player overvalued or undervalued in the market? Consider that the 12-month average price target boasts a downside of 7%.