Anticipating the release of second quarter earnings before Friday's open, TheStreet's Jim Cramer said J.C. Penney (JCP - Get Report)  is under good management, but to lift its earnings and possibly a dividend for shareholders, it needs to fix the balance sheet.

"J.C. Penney is very well run," Cramer said. "But what's happened again is that they steal the upside."

Shares of J.C. Penney traded up about 77 cents, or 8%, toward the end of the trading day Thursday at about $9.91 per share.

The 114-year-old company headquartered in Plano, Texas, has been headed by CEO Marvin Ellison since Aug. 1 after a 12-year stint at Home Depot (HD - Get Report) as executive vice president.

Ellison was named chief executive in August 2015 and assumed the role of CEO after Mike Ullman retired. Ullman was Penney's CEO from December 2004 through October 2011, and again last summer for a shorter tenure to help focus the company after a few years of instability.

Cramer said two of the largest assets for the company lie with Sephora, the company's private cosmetics retailer, and their houseware products. 

"Now J.C. Penney is doing two things right: Sephora, which is brilliant. The read-through there is just go buy Ulta if you don't like Sephora. And then they're doing more houseware. We want to see how well they do houseware."

Total revenue in 2015 was up 0.3% from the previous year, and shares are up 8.42% Thursday afternoon to $9.92 per share. 

"If they can fix that balance sheet and then even begin to retire some shares, then we know that the cash flow is going to be the way the old days where Penney's used to pay a big dividend and do well," he said. "We're not there yet."

The last time Penney's paid a dividend was back in 2012, according to the company's website.