After its latest earnings report, J.C. Penney is a story of sharp drops: from its 32-percent dive in same-store sales and 28-percent revenue decline to its 15-percent stock drop. Still, one analyst reiterated his "outperform" rating on the struggling retailer.
"I think over the longer term, a more profitable, a higher return on invested capital J.C Penney will emerge," said Brian Nagel, retail analyst and managing director at Oppenheimer. "The near term is very difficult to call."
Investors may be waiting a year for the company to turn the profitability corner, Nagel forecast.
"I think we'll start to get more positive data points here probably midway through 2013 when you get a larger number of their stores remodeled," he said. "But then as I look further out, I don't see the company turning a profit, at least on its income statement, until probably 2014."
Nagel acknowledged that there are a lot of reasons for investors to dislike the Plano, Texas-based company right now.
The company's earnings report painted a grim picture for the company, which is in the midst of a multi-year turnaround led by Chief Executive Ron Johnson. During the holiday quarter, its gross margin fell to 23.8 percent of sales from 30.2 percent in the year-earlier period because the company had to slash prices to clear unsold merchandise at season end.
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But Nagel thinks much of this margin erosion reflects Penney's efforts to get rid of old merchandise to make room for new items.
"It's very reflective of the ongoing struggles at J.C Penney, but it doesn't really tell me much about what's this chain is likely to look like as they remodel their stores and what's the ultimate profit potential of this turnaround company," he added.
Oppenheimer's price target for J.C. Penney over the next 12 to 18 months is $30, which is about 67 percent higher from where shares traded on Thursday.
"Look, this is going to be a long-term time turnaround," Nagel said. "You may get some initial positive data points, but it's going to be a long time before we can say that J.C. Penney's finally turned."
He added that Ron Johnson's announcement during the conference call to begin offering weekly sales to lure back a hesitant consumer is a positive for the retailer.
"I think that's a positive because that's really what's going to drive traffic into the stores," he said. "I think these shifts they're making are for the better of the company."
—By CNBC.com's Katie Little; Follow on Twitter
Brian Nagel does not own J.C. Penney stock.