For Immediate Release
Chicago, IL - January 30, 2012 - 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
J. C. Penney Company Inc
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Here are highlights from Friday's Analyst Blog:
Big, New Ideas from JC Penney
Radical ideas are flourishing at
J. C. Penney Company Inc
), a leading retailer of apparel and footwear, accessories, fashion
jewelry, beauty products and home furnishings, as the company
recently announced a string of strategic measures to enhance
shareholder's value in the coming four years.
New pricing strategy, fresh logo, strategic merchandise
initiatives, reduction in costs, enhancement of shopping experience
and customers shopping at their own terms -- you name it, Ron
Johnson's (Chief Executive Officer of the company) turnaround
blueprint has it all. In short, the company is transforming the way
That being said, let's elaborate a bit more on the initiatives
to get a clear picture of what is on the palate.
Pricing is the Key
Calling it 'Fair and Square,' jcpenney (the new way of referring
it) came up with a new pricing strategy that is segmented into
three types of prices - Everyday, Month-Long Values and Best
The new pricing strategy aimed at keeping the prices low, will
also allow the company to introduce new merchandises regularly.
Moreover, as an extra topping, jcpenney will come up with 12 unique
and exciting monthly promotional events every year to provide
better value to the shoppers.
Further, to enrich the shopping experience, jcpenney will
introduce around 80 to 100 mini brand shops in its stores.
So Much in No Time
With a Herculean task at hand, the company is in no mood to
waste any more time. The transformation activities are slated to
start right from February 1, 2012, with the implementation of its
fresh logo, new pricing strategy and monthly cadence.
Moreover, from August 2012, jcpenney will adopt month-by-month,
shop-by-shop strategy to modernize all stores with latest and
unique assortments. The company said that all the stores will
undergo complete transformation by the end of 2015.
Self Funding for the Change
Shifting focus from stores to financials, jcpenney's COO Mike
Kramer disclosed the long-term financial outlook. The company plans
to fund the entire transformation activities through its cash from
operations. To start with, the company will incur $800 million in
capital expenditures in fiscal 2012 to enrich the shopping
experience of buyers and to establish the company's new in-store
Shaving off Costs
To lower the competitive pressures from its peers like
), the company aims to reduce costs by $900 million in the first
couple of years of its transformation, resulting in lowering the
expenses below 30% of sales. Moreover, the company targets expenses
to be 27% of sales by the end of the transformation process.
Speaking specifically, jcpenney will abridge significant amount
of costs from stores and advertising and from operations at its
Forecast Above Consensus
Management expects fiscal 2012 earnings to meet or exceed fiscal
2010 earnings per share of $2.16. The current Zacks Consensus
Estimate for fiscal 2012 is $1.62 per share.
However, on a reported basis, including one-time items, jcpenney
forecasts earnings of $1.59 per share.
Through its bold and strategic modifications, the company aims
to simplify the operational structure, which will supplement it to
generate positive earnings growth and boost shareholder's
Moreover, the transformation is expected to augment sales and
enhance productivity at stores, which in-turn will lead to strong
The company will not come up with quarterly sales or earnings
guidance, and will no longer provide monthly same store sales
Currently, J. C. Penney retains a Zacks #3 Rank, which
translates into a short-term Hold rating. Moreover, considering the
company's fundamentals, we have a long-term Neutral
Novartis Beats by a Penny, View Guarded
Swiss pharmaceutical giant
) reported earnings per share of $1.23 for the fourth quarter of
2011, marginally beating the Zacks Consensus Estimate of $1.22.
Earnings were also above the prior-year figure of $1.14 per share.
An unimpressive top-line was countered by higher adjusted operating
income resulting in the nominal beat.
Reported earnings were only $0.49, down 48% year over year, due
to huge exceptional and one-time charges of $1.5 billion in the
quarter. The exceptional charges related primarily to the
Tekturna/Rasilez sales decline, discontinuation of some pipeline
candidates and temporary suspension of production at the Lincoln,
Fourth quarter revenues of $14.8 billion fell short of the Zacks
Consensus Estimate of $15.0 billion mainly due to poor performance
of the Sandoz and Consumer Health segments. Foreign exchange
further affected fourth quarter revenue by 1%. Revenues were
however ahead of $14.2 billion recorded in the year-ago period.
For the full year 2011, Novartis announced earnings of $5.57 per
share, slightly below the Zacks Consensus Estimate of $5.63.
Revenues were $58.6 billion, minimally below the Zacks Consensus
Estimate of $58.8 billion. Revenues, however, grew 16% and earnings
were up 8% over the prior year.
Last year, Novartis completed the merger with Alcon following
which Alcon became the second largest division within Novartis. The
recorded revenue of $2.4 billion in the quarter, representing a
pro-forma growth of 6% driven by strong growth of ophthalmic
pharmaceuticals and surgical products.
, Novartis' generic arm, recorded a sales decline of 5% to $2.3
billion as growth from volume expansion was offset by price
erosion. Moreover, the generic version of
) Lovenox was down year over year, which significantly impacted
Sandoz' US retail generics and biosimilars growth. Softer pricing
resulting from increased competition affected generic Lovenox
sales. The volume growth was driven by strong performances in
France, Spain, Russia, Italy and Japan as well as from
Sales at the
Vaccines and Diagnostics
division grew 86% over the year-ago quarter to $671 million. Strong
performance of meningococcal vaccines (particularly Menveo), brisk
diagnostics sales and resolution of shipment delays (which affected
prior quarters) drove the upsurge. One time revenue from
pre-pandemic flu vaccine also boosted sales in the quarter.
sales were down 7% over the prior year to $1.1 billion due to
weakness in sales of over-the-counter (OTC) products. In early
January 2012, Novartis issued a voluntary recall for certain OTC
products in the United States, following the temporary suspension
of operations from its Lincoln, Nebraska facility which affected
OTC sales. The Animal Health division however did well in the
Novartis expects 2012 total constant currency sales to be in
line with 2011 levels. The newly launched products are expected to
make up for Diovan generic erosion, decline in Tekturna/Rasilez
sales, price erosion and ongoing issues at the Lincoln plant. The
Lincoln plant would resume shipments in mid-2012. Management
expects to lose about $1.2 billion in Diovan sales in 2012. This
combined with the Femara patent expiration will affect
Pharmaceuticals revenue by about $2.6 billion. Moreover, Tekturna/
Rasilez sales are forecast to be reduced to half of what they are
Novartis estimates a year-over-year decline in core operating
margins (in constant currencies) in 2012 due to pricing pressure,
generic competition and the suspension of operations at
Currently, we have a Neutral recommendation on Novartis. The
company carries a Zacks #3 Rank ("Hold" rating) in the short run.
Though pleased with Novartis' wide range of products and its
business diversity, we prefer to remain on the sidelines in the
long term due to the imminent patent cliff faced by the
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PENNEY (JC) INC (
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