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With J.C. Penney (JCP), out with a rather tepid-sounding press release this morning, providing no metrics on comps, revenues or other such important detail, the stock is getting pounded pre-market, down 7% as investors are taking the management brevity as a negative sign. Historically the fact is when management has good news, they want to get it out in the public domain.

The flip side of the argument is that JCP maintained guidance for the holiday quarter, thus the brevity of the release may just be management's way of saying nothing has changed. We are long the stock, as a turnaround play for 2014, but the fact is JCP is very different than Best Buy (BBY) and Hewlett-Packard (HPQ) were at this point in time last year.

BBY and HPQ were (and are) generating positive cash-flow from operations, had maintained their dividends and both stocks were trading at 2- 3(x) cash-flow in early January '13. JCP on the other hand is not generating positive cash-flow or free-cash-flow, which is why they were forced to do the secondary in late 2013.

Here is our cash-flow table for JCP for the last three years:

11/2/13 q38/13 q205/13 q102/13 q411/12 q308/12 q205/12 q102/12 q411/11 q308/11 q205/11 q102/11 q411/10 q308/10 q205/10 q1
Cash from operations($737)($708)($752)$161$161$161$161$205$205$205$205$148$148$148$148
Cash from investing($128)($383)(196)($57)($57)($57)($57)($218)($218)($218)($218)($121)($121)($121)($121)
Cash from financing$557$1,805839($3)($3)($3)($3)($266)($266)($266)($266)($124)($124)($124)($124)
Net change in cash($308)$714($109)$101$101$101$101($279)($279)($279)($279)($97)($97)($97)($97)
Cash from operations($737)($708)($752)$161$161$161$161$205$205$205$205$148$148$148$148
Capex($161)($439)($214)($58)($58)($58)($58)($159)($159)($159)($159)($125)($125)($125)($125)
Free-cash-flow($898)($1,147)($966)$104$104$104$104$47$47$47$47$23$23$23$23
4q trailing CFO($2,036)($1,138)($268)$645$689$733$776$820$763$706$649$592
yoy growth
4q trailing capex($872)($768)($387)($230)($331)($432)($533)($634)($600)($567)($533)($499)
y/y growth
4q trailing FCF($2,907)($1,906)($655)$415$358$301$243$186$163$140$116$93
yoy growth
FCF Yield
FCF as % of market cap

* Source: internal TAM spreadsheet, from quarterly and annual SEC filings;

* CFO =cash-flow from operations

* FCF = free-cash-flow

* For the fiscal years 2010. 2011, 2012 we simply took 10-K annual cash-flow numbers and divided by 4. In 2013, when we started tracking JCP fundamentally, the quarterly data is actual cash-flow data.

The bottom line is that JCP needs to start generating positive operating cash-flow and sustain that cash-flow. Ultimately then, free-cash-flow will follow. The fact that JCP didn't provide any real information in this morning's press release is not comforting.

We will evaluate our long position in JCP after seeing volume and price action with today's trading. I'm not impressed with this morning's release, but we will give the stock the benefit of the doubt and see how technicals fall out before deciding what to do.

Source: J.C. Penney: All About Cash-Flow - Dearth Of Detail Today Not Positive