Macy’s, Inc. (M) is approaching its multi-year high at $25.25 after reporting solid Q1 results on May 12 that included a 66% earnings surprise. Estimates are on the rise and the valuation picture is in check, creating a nice opportunity to capture growth and value.
Company Description
Macy’s, Inc., together with its subsidiaries, operates department and online stores in the United States under the Macy’s and Bloomingdale’s name. The company operates 850 stores in 45 states, was founded in 1820 and has a market cap of $10.25 billion.
Even though the domestic economy is showing signs of recovery, American consumers still love a good deal, something they got a very healthy does of in 2009 as retailers slashed prices to stay competitive. That bargain-hungry mentality helped lift Macy’s to strong Q1 results on May 12 that saw the company return to profitability.
First-Quarter Results
Revenue for the period was up 7% from last year to $5.57 billion. Earnings also came in strong, well ahead of expectations at 5 cents, 2 cents better than the Zacks Consensus Estimate. In spite of the challenging environment, Macy’s has an average earnings surprise of 28% over the last four quarters.
Macy’s saw some nice gains in its online business, where sales were up 34% from last year, adding .09% to its 5.5% gain in same-store sales.
Estimates
Estimates have been trending higher for the last few months into the good quarter, with the current year up 29 cents in the last three months to $1.86. The next-year estimate is up 35 cents in the same time to $2.14, a 15% growth projection.
Valuation
Not only does Macy’s have some very nice upward momentum in hand, it also has value, with a forward P/E multiple of 13X, a nice discount to its peer group’s 17X. Its P/B multiple of 2.14X is in line with the industry average of 2.22X.
The Chart
Shares of Macy’s had been trending higher for most of the last year before jumping higher on solid Q1 earnings surprise. Look for support from the trend line on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service. Zacks Investment Research
