Macy's (M), the iconic American retailer, recently hit an all-time high. The company has benefited greatly from the troubles at J.C. Penney (JCP). However, even at recent highs the shares still sport a reasonable valuation. The company has also picked up some recent positive catalysts and the shares are still a buy before earnings tomorrow.
Some recent catalysts for Macy's:
- Deutsche Bank came out yesterday reiterating its "Buy" rating and raised its price target from $47 to $53 a share.
- TheStreet also reiterated its "Buy" rating in late April.
- Maxim Group initiated the shares as a "Buy" in February.
- The move to tax internet retailers that recently passed the Senate should help Macy's be more price competitive on the margin.
- Consensus earnings estimates for both FY2013 and FY2014 have ticked up over the last three months.
4 additional reasons M still looks good at under $47 a share:
- Important to remember going into earnings is that Macy's has beat earnings estimates for twelve straight quarters. The average beat over consensus has averaged 9% over the last four quarters.
- The company rewards shareholders. It pays a 1.7% dividend and has quadrupled its payout since the nadir of the financial crisis. It also has ~$1.5B left on a repurchase program. This would remove ~8% of the float at current prices.
- M sports a five year projected PEG of under 1 (.82).
- The stock sells at ~10.5x next fiscal year's projected earnings and ~8x current operating cash flow.