The price of Macy's Inc. (NYSE:M) stock closed near its 52-week high of $47.23 at $46.88 per share on May 13, which represents an impressive 20 percent gain in 2013 year-to-date. The nation's second largest retailer is scheduled to report its first quarter 2013 earnings on Wednesday, May 15 with a 10:30AM Eastern Daylight Time conference call to discuss the company's most recent financial results. Macy's Inc. is widely covered by analysts in the investment community and, as a result, the company's earnings announcements are typically accompanied with a relatively high level of expectations. The company has a history of exceeding those lofty estimates and also often provides its investors with an outstanding amount of forward guidance to give greater insight into the business trends that have the potential to affect Macy's Inc. There were several revisions of financial guidance and a positive earnings report that impacted the stock of Macy's Inc. in 2013 year-to-date. A careful look at each of these updates, how they affected the stock price, the views of investment analysts providing coverage for M stock, and the path shares of Macy's Inc. have taken on the chart so far in 2013 will contribute to a better understanding of what investors should expect from the Q1 earnings call for the country's second largest retail company.
Shares of M closed the year 2012 at $39.02 per share after a holiday season that took the stock from a high of $41.76 on Black Friday - the most important business day on the calendar of every single U.S. retail company - to an intra-day low of $36.30 per share during the first trading session after Christmas Day. The stock of Macy's Inc. opened the first trading session of 2013 with a strong rally that lifted it to an intra-day high of $39.55 on January 2, which became a price level shares of M struggled the entire rest of January to attain once again. On January 3, Macy's Inc. revised its guidance for fourth quarter 2012 same store sales and decreased its earnings per share estimates in a move that further weighed on M shares. The downward revision of earnings per share from a range of $1.94 to $1.99 per share to a much more modest $1.91 to $1.96 per share on a diluted basis sent a strong signal to analysts that the consensus EPS of $1.98 per share was going to be overly optimistic for the all-important holiday season in the fourth quarter of 2012.
Despite this lowering of expectations, analysts retained their estimates and ratings for M stock and the EPS consensus actually even rose by a penny to $1.99 per diluted share by the time Macy's Inc. was ready to report its fourth quarter 2012 earnings. Only one analyst, Macquarie, downgraded M stock from "outperform" to "neutral" in the period between the revised guidance and the announcement by Macy's Inc. of its fourth quarter earnings on February 26. Shares of M made their lows of 2013 in the week following management's revised guidance by hitting an intra-day low of $36.35 per share on January 10, which was followed by a steady 10 percent rally for the rest of the month to close January only pennies away from its 2013 intra-day high of $39.51 per share. Shares of M traded in a narrow range at the $39 per share level until Macy's Inc. management reversed its lowered guidance from January by restoring its EPS estimates to a range of $1.94 to $1.99 per share on February 7. The upward revision from the negative news of only one month before finally sent M shares through the $40 resistance level that the stock had been testing throughout the first week of February. Significantly, management's constant updates and keeping investors aware of developments in its financial prospects played a key role by informing the markets ahead of the fourth quarter 2012 earnings announcement. Macy's Inc. president and chief executive officer Terry Lundgren, as well as chief financial officer Karen Hoguet, offer investors a high level of transparency into the company's evolving financial condition that contrasts favorably with the rather opaque black box guidance of its smaller retail peers. Macy's Inc. further rewarded investors when it announced Q4 2012 earnings of $2.05 per diluted share on February 26, which shows that management also believes in sandbagging analysts as well as offering timely transparency in its financial guidance.
With its most recent results in mind, investors should be aware that Macy's has a solid history of beating expectations on quarterly earnings announcements. Shares of M closed on February 25 - the trading session before the Q4 2012 earnings report - at $38.52 per share and have rallied approximately 22 percent since that announcement. From the perspective of technical analysis, M shares were testing their 50-day exponential moving average on February 25, gapped open on the day of the Q4 earnings announcement, and have not tested the indicator since that time. Currently, M shares are trading above their 8-day and 20-day EMAs of $46.33 and $45.30 per share, respectively, and 7 percent above the 50-day EMA of $43.65 per share. The powerful uptrend M shares have enjoyed since the Q4 earnings announcement has only seen three occasions during the rally where prices tested the 20-day EMA, which the stock convincingly defended before continuing its ascent to new highs for the year. M shares reached their 52-week high on May 10 ahead of the Q1 2013 earnings announcement on May 15. Analysts have issued 6 positive ratings and increased price targets for M shares since the beginning of May with only one downgrade during that period. The current average analyst price target for Macy's Inc. is in the $53 per share range going into the Q1 earnings report in which the consensus estimate is for the company to earn 53 cents per share on revenues of $6.41 billion.
For investors looking to enter a position in Macy's Inc. shares, it is important to understand that the company has a perfect record of beating analysts' consensus estimates four times in the past four quarters. This history is aided by the transparency with which Macy's Inc. management offers investors and the analyst community about developments in the company's operational and financial performance throughout the quarter. By transmitting information quickly and clearly, Macy's Inc. prevents negative surprises and builds confidence in its ability to execute on its operational strategies. The steady gains in M shares year-to-date in 2013 are poised to continue after the company reports its Q1 earnings on May 15, which presents potential investors with an outstanding opportunity going into the announcement of the company's most recent financial results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.