JC Penney Co. (JCP) reported weak third quarter earnings and again lowered guidance for the fourth quarter, well below our previous estimate of $1.31.The difficult macro environment is taking its toll on consumer discretionary spending and JC Penney's results.

We are heading into the important holiday shopping season, which is the worst time for any retailer to find its stores struggling to generate sales growth. That does not bode well for the company's earnings or its stock price. We are reducing our estimates for 2008 and 2009. We reiterate our Sell rating on JC Penney shares.

JC Penney currently trades at 6.9x our fiscal 2008 EPS estimate and 9.7x our fiscal 2009 EPS estimate. Despite the low P/E multiple, the shares have further downside, in our view. Our target price is about 8x our fiscal 2009 EPS estimate or $14.