Shares of J.C. Penney Inc. (JCP) surged over 20% today after the department store chain announced that holiday same-store sales jumped 3.7% over last year. Encouraged by this news, J.C. Penney now expects fourth-quarter same-store sales growth to be closer to 4%.
But I don’t recommend you get caught up in the hype—In my opinion, JCP is not for sale.
Fun fact: The C. in J.C. Penney—the middle name of the company founder—stands for “Cash.” However, a catchy name can only go so far as this company has been hemorrhaging cash for the past few years.
The company’s failed rebranding strategy is expected to take a toll on fourth-quarter earnings. When J.C. Penney reports last quarter’s results towards the end of February analysts are calling for just $0.07 earnings per share on $3.82 billion in revenue. With this is an improvement over last year’s loss of $0.76 per share, it translates to just 0.9% company-wide sales growth. Ouch.
This is one out of several reasons why JCP is a flat-out sell in my book. If you view on its Portfolio Grader Stock Report page, you’ll see that JCP outright fails on five of the eight fundamental metrics I graded it on, including:
- Sales Growth
- Earnings Momentum
- Analyst Earnings Revisions
- Cash Flow
- Return on Equity
Couple this with lackluster operating margin growth, earnings growth and a weak track record of earnings surprises (all Cs), and this Moderately Aggressive stock receives a D for its Fundamentals. Even worse, institutional buying pressure for JCP has screeched to a grinding halt so it receives a D for its Fundamental Grade. JCP is a Sell so if you’re a current shareholder I recommend you find a good time to unload this ship before it sinks back down.