The Zacks Analyst Blog Highlights: J. C. Penney, Macy's, Target, Kohl's and RLI
CHICAGO, Nov. 12, 2013 /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 the J. C. Penney Company, Inc. (NYSE:JCP-Free Report), Macy's Inc. (NYSE:M-Free Report), Target Corporation (NYSE:TGT-Free Report), Kohl's Corporation (NYSE:KSS-Free Report) and RLI Corporation (NYSE:RLI-Free Report).
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Here are highlights from Monday's Analyst Blog:
JC Penney Posts Improved Sales Metrics
Shares of J. C. Penney Company, Inc. (NYSE:JCP-Free Report) nudged up 1.2% to close at $8.23 on Nov, 8, 2013, after CEO Myron Ullman announced upbeat comparable-store sales results for the month of October.
Comps rose 0.9%, increasing 490 basis points from September. The improvement was driven by restoration of inventory levels of its significant brands such as St. John's Bay, Stafford, and jcp Home (TM). Brands such as Levi's, Nike, Carter's, Dockers, Alfred Dunner, Vanity Fair, and IZOD also generated considerable sales.
The Plano, Texas-based retailer announced that sales on jcp.com for the month under review increased 37.6% year over year on the back of constant improvement in the company's online platform. The home merchandise division registered online sales growth of 50% year over year. Sales in Home categories represented nearly half of the total .com sales for the month of October. Women's, Men's and Children's apparel were also sturdy performers.
The company hinted that gross margin for the third quarter (with October witnessing highest margin levels) increased from the previous one.
J. C. Penney also unveiled 30 Sephora stores in October, bringing the count to 446.
Earlier, J. C. Penney had revealed that its key sales barometer improved in September from the prior month and is expected to last through the remainder of 2013, owing to its turnaround efforts.
J. C. Penney has been in troubled waters for quite some time, given its waning revenues and increased losses. The company has not shown any signs of recovery in the recent past. This is evident from its 7th consecutive quarter of sluggish results on Aug 20. The company has been constantly lagging its peers like Macy's Inc. (NYSE:M-Free Report), Target Corporation (NYSE:TGT-Free Report) and Kohl's Corporation (NYSE:KSS-Free Report) in terms of performance.
However, the company has taken several strategic initiatives to drive traffic and conversion. The company reverted to promotions, which could be a successful sales driver this holiday season.
Investors remain cautious about the stock, as the company endeavors to recover and give itself a major facelift. In a significant development, the company's board of directors in Apr 2013 discharged the Chief Executive Officer (CEO) Ron Johnson of his duties after 17 months, as his ambitious transformational ideas failed to materialize. Consequently, the company's former CEO, Myron Ullman was reinstated in his post.
The company will post third-quarter results on Nov 20. However, our proven model does not conclusively show J. C. Penney is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to beat the estimate but this is not the case here. Although the stock carries a Zacks Rank #3 (Hold), it has an ESP of -23.03% (as the Most Accurate estimate stands at a loss of $2.03 per share, while the Zacks Consensus Estimate is pegged at a loss of $1.65).
The above view is well supported by J. C. Penney's earnings surprise history. The latter shows that the company has missed the Zacks Consensus Estimate by an average of about 523.2% in the trailing four quarters.
RLI Upgraded to Outperform
On Nov 8, 2013 we upgraded our recommendation on RLI Corporation (NYSE:RLI-Free Report) to Outperform from Neutral, based on its earnings outperformance in the third quarter of 2013 that included 47.4% positive earnings surprise. This Zacks Rank #1 (Strong Buy) property and casualty insurer delivered an average positive surprise of 38.8% over the past four quarters.
Why the Upgrade?
Estimates for RLI Corporation have been strengthening since the company reported its third-quarter 2013 results on Oct 16. Earnings per share for the reported quarter stood at $1.40, surpassing the Zacks Consensus Estimate by 47%. RLI Corporation's quarterly revenues of $188.3 million also beat the Zacks Consensus Estimate by 7%.
Moreover, both top and bottom line increased from the year-ago results by 11% and 37.2%, respectively. The improvement came on the back of better underwriting results at property and casualty. The top-line growth was fueled by higher premiums on the back of better market conditions and new product offerings. These positives, in turn, reinforce the long-term expansion plans of the company.
RLI Corporation's strong local branch office network, broad range of product offerings and focus on specialty insurance lines also served as catalysts aiding the company's profits.
RLI Corporation has a sound capital structure that helps it meet the interests of its policyholders, enhance operations in the insurance sector and support growth in its book value in the long term. As of Sep 30, 2013, equity portfolio had a dividend yield of 3.0%.
Following the solid earnings results, the Zacks Consensus Estimate for 2013 moved up 8.4% to $4.65 as 2 of 3 estimates were raised in the last 30 days. Additionally, the estimate for 2014 also rose 8.1% to $4.55 as the 2 of estimates moved north over the same time frame
Although continued low interest rate environment and the exposure to cat losses remain as significant causes of concern, we expect RLI Corporation to perform well in the upcoming quarters, given the improving pricing scenario in the insurance market and widened product lines. Moreover, the company also plans to focus on leveraging its expertise in niche markets and enhance shareholders' value through regular and special dividends.
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