A Shopping Trip to Macy's

 | May 13, 2014 | 11:30 AM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

m

Macy's (M) reports first quarter fiscal 2015 earnings on Wednesday before the market open. After a tough March and an okay April, I believe expectations for the quarter are pretty low. I believe investors will ignore this quarter's results and look forward to the back half of the year

For all the retailers I follow, the first quarter was really tough. All across the country weather impacted sales. Cold, rain, you name it. March was a disaster for almost everyone but sales seemed to have picked up in April. All the retailers that missed March, beat expectations in April.

March was a five-week month that included spring break, Mardi Gras and St Patrick's Day. Easter was late this year and was pushed back to April 20. I'd say the quarter was a wash.

With over 840 stores, I don't think Macy's escaped the drama. That said, in the last three months, Macy's stock has outperformed the S&P 500. Analysts expect Macy's to earn $0.59, up from $0.55 in the year ago period and revenue to rise just 1.09% to $6.47 billion.

The second quarter looks better, since it ends in July and includes back-to-school. Revenue is expected to climb 3.5% to $6.27 billion. The second quarter is the highest margin quarter. Gross margin should climb from 30.64% in the first quarter to 41.7%. For the year, gross margin levels out at 40%.

Investors are looking for revenue of $28.6 billion and $4.48 in earnings per share for fiscal 2015. For the one-year period ending Monday, Macy's shares are up 22%. Over the next year, with the help of expense control, Macy's should be able to boost operating margins from 9.9% to 10.5%.

With higher operating margins, Macy's will be able to generate strong free cash flow. Many analysts expect the company to use that strong free cash flow for a significant stock buyback.

Because of its strong operations, the company has earned a premium stock multiple. If you use 15x next year's estimate of $5.13, you get an implied price target in the mid $70s.

I think there is plenty of time to go shopping. I would look to build a Macy's position on a pullback.

Columnist Conversations

Conclusion SSYS is one of two giants in the 3-D printing arena and is reporting earnings on November 5th, afte...
Market continues to hold onto impressive gains in the last day of a roller coaster trading month. This month ...
UPS is bumping up against a very heavy layer of resistance today. The stock's 1.6% gain has pushed shar...
The 244 area is the first major target off the 10/16 low. It's still a good idea to trail up stops as you go,...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.