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This has not been a great year for the mid-level retailers, as evidenced by weak sales due to the continuing worldwide economic situation and consumer uncertainty. However, both J.C. Penney (NYSE:JCP) and Kohl's (NYSE:KSS) were up approximately 4% on Friday, partly on speculation about the newest change in pricing strategy at J.C. Penney.

In my analysis, I tend to rely heavily on analyst opinion and estimates. I figure they have been studying the stock for a while and probably have a better handle on the numbers than I do. I do look at current news, as well, but I like to lean more on the numbers to provide an objective recommendation.

J.C. Penney is currently trading at about $23, on the low end of its 52-week range. Due to an expectation of an earnings loss this quarter, there is no current PE, but I calculate a forward of 19.3 based on year-end earnings of $1.20. The company pays a 3.6% dividend. The current analyst rating is a 2.6 (1.0 = Strong Buy, 5.0 = Sell) with a mean target price of $28.87. There are 3 Strong Buy recommendations, 3 Buys, 10 Holds, and 4 Underperforms.

The fiscal-year-end 2012 (January 2013) consensus earnings estimate is $1.20, 5 cents less than actual 2011 earnings of $1.25. The estimate for fiscal year-end 2013 is $2.28, 90% higher than 2012.

The stock is down 33% year-to-date, and down 24% from this time last year. The current estimated annual growth rate for the next 5 years is 29.08%, compared to an industry average of 13.65% and a sector average of 14.82%.

Kohl's is trading at approximately $49 per share, in the middle of its 52-week range. It has a PE of 11.46 and pays a 2.7% dividend. Currently analysts rate it a 2.3 (7 Strong Buys, 5 Buys, 11 Holds, and 1 Underperform) with a mean target price of $55.84.

Kohl's' fiscal-year (January 2013) consensus earnings estimate is $4.64, 8% higher than actual 2011 earnings. Its estimate for fiscal-year 2013 is $5.16, 11% higher than 2012.

The stock is up 2% since the beginning of 2012, and down 8% from a year ago. Current 5-year annual growth is estimated at 13.60% vs the S&P at 10.45%.

Both companies are set to report quarterly earnings in early August (JCP on August 8, Kohl's on August 10) and expectations are low. Will J.C. Penney's newest "new pricing strategy" be enough to lift it out of the gutter? Will shoppers like the Every Day Low Pricing model better than the constant sales? It seems to be working for Wal-Mart (NYSE:WMT).

Eventually, however, I go back to the numbers. With JCP's year-end 2013 earnings estimates, I see a stock price of $43, or upside of 40%. I don't personally believe it merits a 19 PE nor do I see a 90% jump in earnings year-over-year, so I discount that to the mean analyst target of $29, which still reflects a healthy 25% gain.

Kohl's PE and earnings estimate leads to a stock price of $59, for 21% upside. This number seems much more reasonable and achievable. Buy Kohl's.

Source: J.C. Penney Vs. Kohl's: Which Is The Better Buy?