February 13, 2017 / 3:11 PM / in 9 months

BUZZ-J C Penney: Morgan Stanley upgrades amid cautious industry view

** J C Penney lifts more than 3 pct as Morgan Stanley raises its rating to “Equal-Weight” from “Underweight”, saying downside risk to stock diminished after its YTD slide

** Analysts say JCP risk-reward looks more balanced; trims PT to $7 from $8

** Still, brokerage says remains “unequivocally negative” on department stores long-term

** Cites three 2016 structural issues likely to recur this year: 1. Worsening store traffic/transactions trends; 2. Amazon.com discount pricing capturing apparel market share; 3. Weak sales trends coupled with rising Q4 holiday expense pressure

** Says holiday results, and recent industry read-throughs from apparel/accessory vendors suggest 2017 guidance will be soft

** U.S. department store chains, hit by slowing sales for more than two years, have used layoffs, store closings and cutbacks to maintain profitability

** Macy’s shares have lifted this month on potential real estate monetization and strategic action with Hudson’s Bay Co

** Of 24 analysts covering JCP shares, 12 have “buy” or higher, 10 “hold” or equivalent, 2 “sell” ratings; median PT $10

** JCP recently up 1.3 pct at $7.23, cutting stock’s YTD loss to 13 pct

** Qtrly reports due next week: Macy’s on Feb 21, Nordstrom Inc and Kohl’s on Feb 23, JCP on Feb 24

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