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JCPenney Reaffirms Fiscal 2016 EBITDA Guidance, Stock up 2.1%

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EBITDA guidance

On May 9, JCPenney’s stock surged by 2.1% following an update on the company’s 1Q16 EBITDA[1. Earnings before interest, tax, depreciation, and amortization] performance and a reaffirmation of the company’s fiscal 2016 EBITDA guidance. In a press release, JCPenney stated that it had exceeded its own EBITDA expectation for fiscal 1Q16 ended April 30, 2016. The company also reaffirmed its full-year fiscal 2016 EBITDA guidance of $1 billion.

JCPenney’s stock declined by 7.5% on May 6 following a news report by the New York Post that indicated weak sales and job cuts by the department store.

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Stock is performing better than peers

As of May 9, JCPenney’s stock price has appreciated by 20.9% since the start of 2016. The stock price of Macy’s (M) has appreciated by 5.4% on a year-to-date basis. The stock prices of Nordstrom (JWN) and Kohl’s (KSS) have declined by 1.9% and 14.9%, respectively, since the start of 2016.

JCPenney’s financial position deteriorated after a series of aggressive changes implemented by former chief executive officer Ron Johnson backfired and led the company to losses. Since the exit of Ron Johnson in 2013, JCPenney has been implementing several initiatives under its turnaround strategy to revive its business. The company’s turnaround efforts included restoring private brands and revamping the home department.

As of May 9, the 12-month price target for JCPenney’s stock is $12, which reflects a 42.6% upside potential. The iShares S&P Mid-Cap 400 Value ETF (IJJ) has 0.3% exposure to JCPenney.

Lower losses expected in 1Q16

JCPenney impressed investors with an improvement in its performance in fiscal 2015 ended January 30, 2016. The company’s adjusted loss per share in fiscal 2015 was $1.03, compared to an adjusted loss per share of $2.67 in fiscal 2014. Higher sales and improved gross margin helped the company in posting a lower loss in fiscal 2015.

For 1Q16, analysts expect JCPenney to report an adjusted loss per share of $0.37. This estimate reflects an improvement compared to an adjusted loss per share of $0.57 in 1Q15. JCPenney is scheduled to report its 1Q16 results on May 13.

In the next part of this series, we’ll discuss the company’s announcement regarding the expansion of its appliances offerings to more stores.

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