Macy’s, Inc. (M) is fresh off the heels of an impressive 67% Q1 earnings surprise that sent shares jumping to a new multi-year high. With a high industry rank and bullish growth projection, this Zacks #1 rank stock is a shopping spree of momentum.
Company Description
Macy’s, Inc., together with its subsidiaries, operates department stores in the United States. The company was founded in 1820, was originally named Federated before changing its name to Macy’s in 2007 and has a market cap of $12.3 billion.
Macy’s had been a bit flat this year before impressive Q1 results from mid May sent shares hurtling into a new multi-year high.
First-Quarter Results
Revenue for the period was up 6% from last year to $5.89 billion. Earnings also looked great, coming in at 30 cents, 67% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 66% over the last four quarters.
The good quarter is the expression of a longer-term strategy that Macy’s has been executing for the last two years to boost sales and increase efficiency.
The encouraging results and earnings momentum drove the company to double its quarterly dividend to 10 cents, another indication that Macy’s is feeling good about its business.
Financial Profile
Although Macy’s balance sheet looks a bit bloated, its definitely headed in the right direction, with cash and short-term investments up $171 million from last year to $1.15 billion while total debt fell more than $1.1 billion to $7.08 billion.
Estimates
The good quarter led analysts to raise estimates, with the current year adding 17 cents to $2.48. The next-year estimate is up 20 cents in the same time to $2.80, a bullish 13% growth projection.
Valuation
But in spite of the gains, the valuation picture still looks solid, with a PEG ratio of .88, safely below the benchmark for value of 1.
12-Month Chart
On the chart, shares had been a bit flat for the last few months before spiking into a new multi-year high on the good quarter. But in spite of the solid gain, the stochastic below the chart is signaling that shares are still trading far away from overbought territory. Look for support from the long-term trend 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 Zacks Momentum Trader Service.
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