J. C. Penney Q3 Earnings: Is JCP Dirt Cheap at 0.3x Price/Book?

in EARNINGS/INVESTING IDEAS/VALUATION MULTIPLES by

With more people are going to the mall to enjoy the offerings of the food court than shop at the retailers, according to UBS, investors have definite cause for concern. That’s why analysts will be listening carefully to J. C. Penney Company, Inc. (NYSE:JCP) earnings call on November 15, 2019. The company is scheduled to report Q3 earnings results before markets open for trading on Friday.

JCP Total Revenues

The company is expected to report earnings of -$0.55/share on revenue of $2.421 billion. The consensus earnings per share (EPS) of -$0.55/share is based on a poll of 8 analysts.

The revenue forecast of $2.421 billion based on a poll of 7 analysts. Last year the company reported $2.653 billion in revenue for the quarter.

Expected to report EPS of -$0.55/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $2,421.00 $2,653.00 -8.7%
EPS -$0.55 -$0.52 NM

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, and missed expectations 3 quarters. What are your expectations from J. C. Penney for this earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.32 -$0.18 NM Beat
Q1, 2020 -$0.37 -$0.46 NM Missed
Q4, 2019 $0.19 $0.18 -5.5% Missed
Q3, 2019 -$0.56 -$0.52 NM Beat
Q2, 2019 -$0.05 -$0.38 NM Missed
Q1, 2019 -$0.24 -$0.22 NM Beat
Q4, 2018 $0.47 $0.57 21.3% Beat
Q3, 2018 -$0.43 -$0.33 NM Beat

J. C. Penney’s stock price performance has been very reactive to earnings announcements in the past. After the last earnings report for the period ending August 3, 2019, the stock price reacted by increasing by 6.1%. In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-15 $0.57 $0.60 6.1% Increase
2019-05-21 $1.15 $1.01 -12.2% Decline
2019-02-28 $1.24 $1.54 24.2% Increase
2018-11-15 $1.22 $1.29 5.7% Increase

Fundamentals And Technical Analysis

J. C. Penney is currently trading at $1.12/share, up 3.7% for the day. The company is trading at approximately 58% of its 52-week high of $1.92/share. The company’s stock price has quietly been soaring over the last three months, up over 89% since the last earnings report.

JCP Stock Price

The question on everyones mind is – will the rally continue after earnings? J. C. Penney’s current share price implies a price-to-book (P/B) multiple of 0.3x which does make it seem cheap relative to book value. The company isn’t profitable though so the current share price also implies a price-to-earnings (P/E) multiple of -1.2x and a forward P/E multiple of -0.8x.

The company’s 14 Day Relative Price Index (RSI) of 56.14 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30. The following table summarizes some other key fundamental ratios:

Data as of November 11, 2019
Metric Value
Last Fiscal Period FY2020.Q2
Period End Date August 3, 2019
Stock Price (Current) $1.08
P/E Ratio -1.2x
P/E Ratio (Fwd) -0.8x
PEG Ratio NM
Total Debt to Capital (%) 93.9%
Levered Free Cash Flow $178.0 million
Enterprise Value / EBITDA 8.7x

Company Profile: J. C. Penney Company, Inc.

J. C. Penney Company, Inc. is a small-cap stock with a market capitalization of $343.3 million and a total enterprise value of $5.175 billion. The company operates in the Consumer Discretionary sector and Multiline Retail industry.

J. C. Penney Company, Inc. sells merchandise through department stores. The company primarily sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products, and home furnishings; and provides services, including styling salon, optical, portrait photography, and custom decorating services.

As of November 1, 2019, it operated approximately 850 stores in the United States and Puerto Rico. The company also sells its products through its Website, jcpenney.com. The company was founded in 1902 and is based in Plano, Texas.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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