The Zacks Analyst Blog Highlights: J. C. Penney, Caterpillar, CNH Global NV, Komatsu and Volvo AB

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Nov 15, 2011, 09:30 ET

CHICAGO, Nov. 15, 2011 /PRNewswire/ -- 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 J. C. Penney Company Inc. (NYSE: JCP), Caterpillar Inc. (NYSE: CAT), CNH Global NV (NYSE: CNH), Komatsu Ltd. (OTC: KMTUY) and Volvo AB (OTC: VOLVY).

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Here are highlights from Monday's Analyst Blog:

J.C. Penney Beats on Bottom Line

J. C. Penney Company Inc. (NYSE: JCP), a leading retailer of apparel and footwear, accessories, fashion jewelry, beauty products and home furnishings, recently delivered third-quarter 2011 earnings of 11 cents a share that came way ahead of the Zacks Consensus Loss Estimate of 12 cents a share. However, it plunged 42.1% from the prior-year quarter's earnings of 19 cents a share.

The company's strategic initiatives to reduce costs coupled with the healthy performance of women's accessories and men's apparel boosted the quarterly results, while, southeast region brought the highest revenue.

On a reported basis, including one-time items, the company reported a loss of 67 cents a share.

Quarter Details

The quarterly sales of $3,986 million fell short of the Zacks Consensus Estimate of $4,021 million, and declined 4.8% from the prior-year quarter. Total sales were adversely affected by the discontinuation of the catalogs business. Internet sales through jcp.com decreased 5.4% to $341 million in the quarter.

Comparable-store sales inched down 1.6% during the quarter compared with a 1.9% increase in the prior-year period.

The in-store Sephora departments continue to outperform in attracting younger and more affluent customers. During the quarter, J. C. Penney opened 32 Sephora stores, bringing the total count to 308. The Sephora concept is expected to be a significant revenue driver.

Moreover, the company notified that it has also expanded the MNG by Mango and Call It Spring by The ALDO Group to 500 and 505 locations, respectively.

The company's gross profit fell 8.9% to $1,489 million, whereas gross profit margin contracted 160 basis points to 37.4%, reflecting lower sales and higher promotional spending. Management now expects third-quarter 2011 gross margin to be reasonably down compared with the prior-year period.

Other Financial Details

J. C. Penney ended the quarter with cash and cash equivalents of $1,085 million, long-term debt of $2,871 million and shareholders' equity of $4,555 million. Year-to-date, the company deployed $469 million toward capital expenditures, and generated negative free cash flows of $736 million.

Sales and Earnings Forecast

The Plano, Texas-based retailer, J. C. Penney, provided guidance for fourth-quarter 2011 comparable store sales to remain flat to up slightly, while total sales is expected to decrease 250 to 300 basis points less than comparable store sales.

Management now expects fourth-quarter 2011 earnings between $1.05 and $1.15 a share. However, on a reported basis, including one times items, earnings are expected to be in the range of 64 cents and 74 cents a share.

The current Zacks Consensus Estimate for the fourth quarter is $1.14 a share, which lies near the upper end of the company's guidance range. Following, management's outlook, we could witness a correction in the Zacks Consensus Estimates in the coming days, with analysts tweaking their estimates in line with the company.

J. C. Penney's long-term growth target is to achieve earnings of $5.00 per share in 2014, on the heels of compelling private and national brands, redefined jcp.com platform, cost containment initiatives, closure of underperforming units and restructuring of supply chain.

Moreover, to drive sales and improve traffic, J. C. Penney added 'Liz Claiborne', 'MNG by Mango', 'Arizona', 'St. John's Bay', 'Modern Bride' and 'Call it Spring' brands to its portfolio.

Caterpillar Gung Ho on Expansion

Caterpillar Inc. (NYSE: CAT), devoted to its long-term vision of becoming a leader in the mining industry, announced plans to build a mining truck facility in Indonesia besides increasing capacity at its large mining truck facility and large track-type tractor unit in the United States to the tune of $790 million.

Caterpillar will open a new mining truck plant in Batam, Indonesia for a total investment of $150 million. The facility will cater to mining customers across Asia Pacific. The facility is expected to be operational in 2012 for truck bodies, with the first trucks produced in the third quarter of 2013.

This marks Caterpillar's second manufacturing operation in Indonesia following an existing production facility located in Cileungsi, West Java, which is focused on producing excavators and skidders. The company has also approved plans to triple excavator production at the Cileungsi location.

The current investments in East Asia follow a string of such capital outlays meant to tap the growing Asian market. Caterpillar continues to make significant investments in China announcing a wide range of new facilities, with as many as nine new units currently under construction.

During the past three decades, Caterpillar has grown from a single sales office in Beijing to 16 locations for manufacturing, 4 research and development facilities, 3 logistics and parts centers and other offices. Besides, Caterpillar had previously announced the construction of two new manufacturing operations in Thailand.

The company has also made a bid to acquire China based underground coal mining equipment manufacturer ERA Mining Machinery Limited with an eye on the mining industry in China.

Not neglecting the domestic base, Caterpillar announced expansion plans at its existing manufacturing facilities in Decatur, Illinois, and East Peoria, Illinois. The company plans to invest nearly $300 million to increase capacity for large mining trucks produced in Decatur and about $340 million for production of large track-type tractors in East Peoria, which are used in mining applications across the globe.

The company expects the expansion at Decatur to be completed by 2016 and the East Peoria extension by 2015. Once completed, Caterpillar's worldwide large truck manufacturing volume will nearly triple its current capacity while large track-type tractor production capabilities will double in East Peoria.

Caterpillar is riding the wave of heightened construction and mining activity in the developing markets, triggered by the demand for coal, copper and iron ore. The company expects demand to continue expanding over the next decade. The recent Bucyrus acquisition has positioned Caterpillar as the leading global mining original equipment manufacturer.

Shares of Caterpillar presently retain a Zacks #3 Rank (short-term Hold recommendation). We also reiterate our long-term Neutral rating.

Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base.

Caterpillar operates three divisions – Machines, Engines and Financial Products. Caterpillar competes with the likes of CNH Global NV (NYSE: CNH), Komatsu Ltd. (OTC: KMTUY) and Volvo AB (OTC: VOLVY).

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