Shares of J.C. Penney (JCP) were lower over 1.3% during pre-market trading on Monday after the stock was downgraded at Baird to "Neutral" from "Outperform" with a $5 price target.

Baird analyst Mark Altschwager noted that the retailer reported first quarter revenues below analyst projections, despite delivering better-than-expected earnings per share results, driven by gross margin upside.

Although management has put J.C. Penney back on the right course, core EBITDA growth seems harder to achieve based on "intensifying" industry headwinds and "eroding" earnings quality, Altschwager contended. 

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