J.C. Penney Company Earnings: Margins Suffer for Five Quarters Straight

S&P 500 (NYSE:SPY) component J.C. Penney Company Inc.’s (NYSE:JCP) third quarter loss narrowed due mainly to shrinking costs. J. C. Penney is a holding company that offers merchandise and services to consumers through department stores and direct (Internet/catalog) channels.

Earnings season is back and more important than ever. Get our newest CHEAT SHEET stock picks now

J.C. Penney Company Inc. Earnings Cheat Sheet

Results: Loss narrowed to $123 million (loss of 56 cents per diluted share) from $143 million (loss of 67 cents per share) in the same quarter a year earlier.

Revenue: Fell 26.6% to $2.93 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: J.C. Penney Company Inc. reported an adjusted net loss of 93 cents per share. By that measure, the company fell short of the mean analyst estimate of a loss of 8 cents per share. It fell short of the average revenue estimate of $3.48 billion.

Quoting Management: Ron Johnson, chief executive officer of jcpenney said, “While the quarter overall was challenging, the performance of jcp’s new brands and shops reinforces our conviction to transform jcpenney into a specialty department store. Today, jcp is really a tale of two companies. By far the largest part of our store is the old jcpenney, which continues to struggle and experience significant challenges as evidenced by our third quarter results. However, the new jcp, centered around the shop concept, is gaining traction with customers every day and is surpassing our own expectations in terms of sales productivity which continues to give us confidence in our long term business model.”

Key Stats:

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 4.8 percentage points from the year-earlier quarter to 32.5%. In that span, margins have contracted an average of 4.4 percentage points per quarter on a year-over-year basis.

The company has missed analyst estiamtes for four quarters in a row. It fell short by 13 cents in the second quarter, by 14 cents in the first quarter, and by 46 cents in the fourth quarter of the last fiscal year.

Revenue has fallen in the past four quarters. Revenue declined 22.6% to $3.02 billion in the second quarter. The figure fell 20.1% in the first quarter from the year earlier and dropped 4.9% in the fourth quarter of the last fiscal year from the year-ago quarter.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from $1.45 per share to 81 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from 95 cents a share to 28 cents over the last ninety days.

Stocks with improving earnings metrics are worthy of your extra attention. In fact, “E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our CHEAT SHEET investing framework for this very reason. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

Don’t Miss These Additional Hot Stories:

Is This Airline Flying High Enough to Buy?

Here’s How Ford Will Dethrone Toyota

Is Apple Still the Top Innovator?