The Zacks Analyst Blog Highlights: J. C. Penney, Macy's, Target, Kohl's and Calpine

Zacks

For Immediate Release
 
Chicago, IL – September 27, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the J. C. Penney Company, Inc. (JCP-Free Report), Macy’s Inc. (M-Free Report), Target Corporation (TGT-Free Report), Kohl’s Corporation (KSS-Free Report) and Calpine Corporation (CPN-Free Report).
 
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Here are highlights from Thursday’s Analyst Blog:

Why Are JC Penney Shares Falling (Again)?
 
Shares of J. C. Penney Company, Inc. (JCP-Free Report) tumbled to touch a 52-week low of $9.93 on Wednesday, Sep 25, and eventually closed trade at $10.12.  The stock’s year-to-date performance is also disappointing, as it has plunged 51.4%.

Shares of this retail chain have been on a downtrend since the beginning of August.  Given its dismal second-quarter fiscal 2013 results and the numerous challenges that the company faces at present, the stock has more downside left. J. C. Penney has been in the red zone since the beginning of fiscal 2013, posting two successive quarterly losses.

We observe that the decreasing revenues and higher losses are one of the primary reasons behind the stock’s downslide. Moreover, its restructuring initiatives have been crumbling as well, as the company is showing no improvement. Alongside, it is constantly lagging its peers, Macy’s Inc. (M-Free Report), Target Corporation (TGT-Free Report) and Kohl’s Corporation (KSS-Free Report) in terms of performance.

For the second quarter, J. C. Penney reported an adjusted loss $2.16, dashing all hopes of recovery, at least in the near term. The loss incurred was wider than the year-ago quarter loss of 37 cents. The Zacks Consensus Estimate for the quarter was a loss of $1.13.

If we look at the earnings surprise history, J. C. Penney has missed the Zacks Consensus Estimate with an average negative surprise of approximately 523% in the trailing four quarters.

J. C. Penney’s dismal quarterly performance was reflected in the downward movement in the Zacks Consensus Estimate, as analysts are increasingly losing hope about the stock’s future performance. The Zacks Consensus Estimate of loss for fiscal 2013 widened significantly in the last 60 days to $5.78 cents per share from $3.48.

Investors remain wary of this Zacks Rank #3 (Hold) stock as the company struggles to cope with the falling revenues. In a major development, the company’s board of directors discharged the Chief Executive Officer (CEO) Ron Johnson of his duties, as his ambitious transformational ideas failed to materialize. Consequently, the company’s former CEO, Myron E. (Mike) Ullman, III has been reinstated in his post with immediate effect.

Further, in order to shield itself from takeover attempts, J. C. Penney implemented a Stockholder Rights Plan – often referred to as “Poison Pill” – to ward off any effort to gain a controlling interest in the company by any person or a group of persons, which could be detrimental to the company or its shareholders.

In the latest development, according to Reuters, J.C. Penney is seeking to raise nearly $750 million to $1 billion in new equity to construct stronger cash reserves to gear up for the holiday season. Management is also looking forward to build a strong liquidity position in case the company’s performance does not meet the desired expectations.

It remains a wait and watch story whether the initiatives undertaken could bring back the derailed stock on track, and rekindle the stock’s momentum.
 
Calpine Lowered to Strong Sell
 
On Sep 25, 2013, Zacks Investment Research downgraded electric utility Calpine Corporation (CPN-Free Report) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Calpine continues to disappoint market expectation, falling short of the Zacks Consensus Estimate in the last three quarters with an average earnings miss of 235.6%. The uninspiring performance has led to downward estimate revisions.

On Jul 25, Calpine reported second-quarter loss per share of 8 cents, widely missing the Zacks Consensus Estimate of earnings of 8 cents by 200%. The company’s third quarter results slated to be released on Nov 5 do not look promising either in the light of recent trends.

In the second quarter, Calpine registered a year-over-year decline in commodity margin in all its services territories. The softer results were primarily due to lower generation output resulting from milder weather and a reversal of coal-to-gas switching in the wake of higher natural gas prices.

Calpine smarting under weak financial results is undertaking a number of initiatives. In Aug 2013, the company started operating two combined-cycle natural gas-fired power generation plants, which together have a generation capacity of more than 900 megawatts. However, it appears that Calpine will have to take more proactive measures to turn the tide. Long-term sales growth is presently pegged at -9.86%.

The Zacks Consensus Estimate for 2013 decreased 13.2% in the last 60 days to 53 cents per share. For 2014, the Zacks Consensus Estimate decreased 8.3% in the last 60 days to 84 cents per share.
 
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