Zacks Analyst Blog Highlights: J.C. Penney Company, Macy's, Kohl's Corporation, Computer Sciences Corporation and Hewlett-Packard - Press Releases

For Immediate Release

Chicago, IL – November 12, 2010 – Zacks.com Analyst Blog features: J.C. Penney Company Inc. (JCP), Macy's Inc. (M), Kohl's Corporation (KSS), Computer Sciences Corporation (CSC) and Hewlett-Packard Company (HPQ).

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Here are highlights from Thursday's Analyst Blog:

Earnings Preview: JC Penney

J.C. Penney Company Inc. (JCP) is slated to report its third-quarter 2010 financial results before the bell on Friday, November 12, 2010. The current Zacks Consensus Estimate for the quarter is 17 cents a share. For the quarter to be reported, the Zacks Consensus Estimate for revenue is $4,227 million.

Our View

We believe that the stock will remain under pressure in the near term. Despite the introduction of new product lines, sales performance has not been impressive. J.C. Penney hinted that the discontinuation of the publishing of Big Book catalogs has adversely affected the sales. Although the in-store Sephora shops inspire confidence, a consistent improvement in the stock has yet to be witnessed.

Consequently, we have an Underperform rating on the stock. However, J.C. Penney holds a Zacks #3 Rank, which translates into a short-term Hold recommendation.

J.C. Penney, which competes with Macy's Inc. (M) and Kohl's Corporation (KSS), currently operates 1,100 department stores in the United States and Puerto Rico.

CSC Delivers Decent Numbers

Computer Sciences Corporation (CSC) reported second quarter 2011 earnings per share (EPS) of $1.18, exceeding the Zacks Consensus Estimate of $1.17. Revenue of $3.97 billion, remained below the Zacks Consensus Estimate of $3.99 billion.

Computer Sciences reported net income attributable to the company's shareholders of $184.0 million, which was down 14.8% from $216.0 million reported in the year-ago quarter. The second quarter EPS was $1.18, down from $1.40 reported in the year-ago quarter.

Balance Sheet

Computer Sciences generated $402.0 million of operating cash flows, which declined from $572.0 million from the prior-year quarter, and free cash flow of $175.0 million was well below the $429.0 million generated in the second quarter of 2010.

The company exited the quarter with $2.65 billion of cash and cash equivalents, up from $2.43 billion reported in the previous quarter. The debt balance was $3.83 billion at the end of the quarter and debt to capitalization ratio declined by 90 basis points from the last quarter to 35.9%.

Guidance

Computer Sciences provided its guidance for fiscal year 2011. Accordingly, Computer Sciences expects new business awards in excess of $18.5 billion, revenue in the range of $16.5 to $17.0 billion, operating margin of between 8.5% and 9.0% and EPS in the range of $5.35– $5.45. Free cash flow is expected to be equal to or greater than 90% of net income.

Recommendation

We are optimistic about the company's outlook for fiscal 2011, its enhanced product portfolio, growing customer base and the revival in the macro economy. On the other hand, we are a bit concerned about the intense competition in the IT and cloud computing space from players such as Hewlett-Packard Company (HPQ). Moreover, demand from Computer Sciences' European customers may be muted in the upcoming quarters.

Currently, Computer Sciences has a Zacks #4 Rank (short-term Sell rating).

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