The Macy's (M) turnaround has been a great story the past few years, and the stock hasn't disappointed this year either, up from its 12.30.11 close of $32.18 to today's $37, for an approximate year-to-date return of 15%.
We're sorry for the late publication, but on Wednesday morning before the opening bell M will report fiscal 2nd quarter earnings with analysts consensus looking for $0.64 in earnings per share (versus $0.55 last year) on $6.1 billion in revenue (versus $5.939 in last year's q2) for expected year-over-year growth of 16% and 35 respectively.
Macy's reported pretty decent July comp's last week, up over 4% versus June's 1.2% disappointment, so the spring swoon in both retail and Macy's in general may be temporary.
The stock is cheap, what with consensus expecting $3.36 and $3.76 this year and next resulting in 17% and 12% growth respectively, since the stock sports a 12(x) multiple along with a 9% free-cash-flow yield. (Free-cash-flow yield is calculated by dividing the 4-quarter trailing free-cash-flow with the current market cap.)
Earnings and revenue estimates have trekked higher over the last year (always a good sign) although M needs to deliver tomorrow morning in terms of analyst consensus.
Because quite a bit of retail reports comps each month, it is the margins and changes in margins that gain in importance with earnings. One analyst model we reviewed is looking for gross margins near 41.5% and an EBIT margin between 8% - 9%.
Macy's 52-week high is $42 and change from the spring rally. The stock traded as low as $32 and change in early July so we are about right in the middle of the 6-month range.
We really like the cash and free-cash-flow generation as a safety net for the stock, but we wont buy in front of earnings.