Macy's Is A Buy Going Into Earnings

| About: Macy's Inc. (M)

Macy's (NYSE:M), the iconic American retailer, recently hit an all-time high. The company has benefited greatly from the troubles at J.C. Penney (NYSE: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:

  1. 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.
  2. 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.
  3. M sports a five year projected PEG of under 1 (.82).
  4. The stock sells at ~10.5x next fiscal year's projected earnings and ~8x current operating cash flow.

Disclosure: I am long M. 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.