NEW YORK (TheStreet) -- Shares of J.C. Penney (JCP) are up by 0.50% to $8.08 in pre-market trading on Friday morning, following a ratings upgrade to "market perform" from "underperform" at BMO Capital Markets.
The firm said it raised its rating on the department store retailer based on growing confidence that the company's management will be able to reach its 2017 EBITDA goal of $1.2 billion. BMO analysts also say they are less concerned about liquidity.
BMO Capital increased its price target on J.C. Penney to $8 from $7.
"Management has demonstrated significant gross margin rate improvement from 2012 to 2014 (31.31% vs 34.76%), and the 1Q15 results (+338bp) give us growing confidence the company can reach its targeted GM rate increase of 100bp to 150bp in 2015 (BMO 35.98%) with potential for further improvement beyond 2015 to 37%-39%," BMO said in an analyst note.
Separately, TheStreet Ratings team rates PENNEY (J C) CO as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate PENNEY (J C) CO (JCP) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 3.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- In its most recent trading session, JCP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Multiline Retail industry and the overall market, PENNEY (J C) CO's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has increased to -$226.00 million or 16.60% when compared to the same quarter last year. Despite an increase in cash flow, PENNEY (J C) CO's cash flow growth rate is still lower than the industry average growth rate of 31.80%.
- 36.44% is the gross profit margin for PENNEY (J C) CO which we consider to be strong. It has increased from the same quarter the previous year.
- You can view the full analysis from the report here: JCP Ratings Report