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Can JCPenney’s 2Q16 Results Move Its Stock Higher?

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Aug. 8 2016, Published 2:31 p.m. ET

Upcoming results

Mid-tier department store chain JCPenney (JCP) is scheduled to announce its 2Q16 results on August 12, 2016. The company delivered mixed results in the previous quarter.

JCPenney was able to improve its earnings per share, adjusted for one-time items, in 1Q16 ended April 30, 2016. However, the company’s 1Q16 sales fell amid a tough retail environment.

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YTD stock price movement

As of August 5, 2016, JCPenney’s stock price has risen by 34.7% since the start of 2016. This is in contrast to the stocks of the company’s department store peers, which have fallen on a YTD (year-to-date) basis. The stock prices of Macy’s (M), Nordstrom (JWN), Kohl’s (KSS), and Dillard’s (DDS) have fallen by 4.7%, 13.1%, 20.7%, and 4.7%, respectively, on a YTD basis.

Investors can gain exposure to these department store stocks through the SPDR S&P Retail ETF (XRT). XRT has 1.2% exposure to JCPenney.

JCPenney’s stock price has risen by 23.9% since the announcement of its results in May 2016. Investors seem to be optimistic about the company’s turnaround. JCPenney’s position was adversely impacted by certain missteps under the leadership of its former CEO Ron Johnson. The company has implemented several initiatives to revamp its business since Johnson’s exit in 2013. These strategic initiatives include a refocus on private brands and home businesses.

12-month price target

As of August 5, the 12-month price target for JCPenney’s stock was $11.52. This price target reflects a 22.7% return potential from its $9.39 stock price on August 5.

Let’s look at some analysts’ target prices. Neely Tamminga, an analyst at Piper Jaffray, has a price target of $19, which reflects an upside potential of 102% over the stock’s August 5 price. In contrast, Michael Binetti of UBS has a target price of $7, which reflects a downside potential of 25.5%.

Note that the 12-month price target could be adjusted upward or downward in reaction to the company’s upcoming 2Q16 results. We’ll look at analysts’ expectations from JCPenney’s bottom line in the next part of this series.

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