J.C. Penney (JCP ) has been a very volatile stock over the last two years. It has been in the fight for its life and nothing has changed following Q4 earnings which have been met with high volume selling. Although it is slightly above a 52-week low, for the last few months this stock has been trading lower than it has since electronic trading was implemented. It is trading lower than the height of the great recession, the turmoil of 2011-2012 when it tried changing business models, lower than the stock market crash following the so-called dotcom bubble.  In this column we discuss and analyze recent performance.

Look, performance has been far from stellar from an operational perspective, but the company has been turning the corner. We believe at the very least there will be a bit of a reversion to the mean which could be good for a quick gain. Longer-term, the name has tried to revamp its outdated appearance and apparel. A few moves include reworking store atmospheres, introducing new wardrobe sizes to cater to more clientele, and the selling of appliances. While these moves alone do nothing to guarantee a profit, the fact is the company is gaining traction once again and this is evidenced in recent sales.

What do we mean? In Q4 2017, the company reported sales of $4.033 billion, which rose 1.8% year-over-year and was just behind the consensus expectations by roughly $20 million. However, net income did exceed expectations, mostly on the back of liquidating a ton of inventory as more stores were shuttered. Net income was $254 million, or $0.81 per share, compared to net income of $192 million, or $0.61 per share in the same period last year.  The improvement was primarily due to a $75 million tax reform benefit recorded in the fourth quarter this year. However, it was the closing of more stores that drove most of this negative headline performance and that needs to be taken into account, when we back out the taxes. Adjusted net income was $179 million, or $0.57 per share, for the fourth quarter this year.  Adjusted net income for the fourth quarter last year was $202 million, or $0.64 per share. Sure, so-called one-time events have defined the last 5-6 years of drama in this stock, but the fact is that there is a bottom, and we may be near it.