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Macy's (M) Down 4.6% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Macy's (M - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Macy's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Macy’s Beats on Q3 Earnings & Sales, Updates Outlook
Macy’s, Inc. delivered the sixth straight quarter of positive earnings surprise, when it reported third-quarter fiscal 2018 results. Total sales also came ahead of the consensus mark after missing the same in the preceding quarter. Better-than-expected results prompted management to lift earnings view.
The company highlighted that impressive performance across Macy’s, Bloomingdale’s and Bluemercury brands boosted results. Management hinted that its Growth50 stores initiative is aiding its brick-and-mortar performance. This along with double-digit growth in the digital business bode well.
Let’s Delve Deep
Macy’s posted adjusted earnings of 27 cents a share that comfortably surpassed the Zacks Consensus Estimate of 14 cents and rose from 21 cents reported in the year-ago period. Earnings gained from solid performance across stores as well as persistent digital growth.
This Cincinnati, OH-based company generated net sales of $5,404 million that surpassed the Zacks Consensus Estimate of $5,379 million and increased 2.3% year over year.
Comparable sales (comps) on an owned plus licensed basis jumped 3.3%, while on an owned basis, comps increased 3.1%. This marked the fourth straight quarter of comps growth for the company. Strategic investments across stores, technology and merchandising are aiding comparable sales growth. Total transactions jumped 3.8% in the quarter owing to sturdy demand at both online and in stores.
Gross margin remained flat year over year at 40.3%. Management continues to expect gross margin to improve marginally during the fiscal year. Adjusted EBITDA declined 3.8% to $407 million, while adjusted EBITDA margin contracted 50 basis points to 7.5%.
Other Financial Aspects
Macy’s ended the quarter with cash and cash equivalents of $736 million, long-term debt of $5,469 million, and shareholders’ equity of $5,667 million, excluding non-controlling interest of $22 million. Management expects to incur capital expenditures of about $1.05 billion in fiscal 2018.
FY18 View
Backed by the confidence in its strategic initiatives and solid execution Macy’s revised its view for fiscal 2018.
The company now anticipates net sales to increase in the range of 0.3-0.7% compared with the prior guidance of flat to up 0.7%. Credit card revenue is anticipated to be in the band of $740-$755 million.
Comps on an owned plus licensed basis are projected to increase 2.3-2.5% increase compared with the previous guidance of 2.1-2.5% growth. However, the company continues to expect comps on an owned basis to be 20-30 basis points lower than comps on an owned plus licensed basis.
Management now envisions adjusted earnings in the range of $4.10-$4.30 per share for fiscal 2018, up from the prior view of $3.95-$4.15.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Macy's has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Macy's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Macy's (M) Down 4.6% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Macy's (M - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Macy's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Macy’s Beats on Q3 Earnings & Sales, Updates Outlook
Macy’s, Inc. delivered the sixth straight quarter of positive earnings surprise, when it reported third-quarter fiscal 2018 results. Total sales also came ahead of the consensus mark after missing the same in the preceding quarter. Better-than-expected results prompted management to lift earnings view.
The company highlighted that impressive performance across Macy’s, Bloomingdale’s and Bluemercury brands boosted results. Management hinted that its Growth50 stores initiative is aiding its brick-and-mortar performance. This along with double-digit growth in the digital business bode well.
Let’s Delve Deep
Macy’s posted adjusted earnings of 27 cents a share that comfortably surpassed the Zacks Consensus Estimate of 14 cents and rose from 21 cents reported in the year-ago period. Earnings gained from solid performance across stores as well as persistent digital growth.
This Cincinnati, OH-based company generated net sales of $5,404 million that surpassed the Zacks Consensus Estimate of $5,379 million and increased 2.3% year over year.
Comparable sales (comps) on an owned plus licensed basis jumped 3.3%, while on an owned basis, comps increased 3.1%. This marked the fourth straight quarter of comps growth for the company. Strategic investments across stores, technology and merchandising are aiding comparable sales growth. Total transactions jumped 3.8% in the quarter owing to sturdy demand at both online and in stores.
Gross margin remained flat year over year at 40.3%. Management continues to expect gross margin to improve marginally during the fiscal year. Adjusted EBITDA declined 3.8% to $407 million, while adjusted EBITDA margin contracted 50 basis points to 7.5%.
Other Financial Aspects
Macy’s ended the quarter with cash and cash equivalents of $736 million, long-term debt of $5,469 million, and shareholders’ equity of $5,667 million, excluding non-controlling interest of $22 million. Management expects to incur capital expenditures of about $1.05 billion in fiscal 2018.
FY18 View
Backed by the confidence in its strategic initiatives and solid execution Macy’s revised its view for fiscal 2018.
The company now anticipates net sales to increase in the range of 0.3-0.7% compared with the prior guidance of flat to up 0.7%. Credit card revenue is anticipated to be in the band of $740-$755 million.
Comps on an owned plus licensed basis are projected to increase 2.3-2.5% increase compared with the previous guidance of 2.1-2.5% growth. However, the company continues to expect comps on an owned basis to be 20-30 basis points lower than comps on an owned plus licensed basis.
Management now envisions adjusted earnings in the range of $4.10-$4.30 per share for fiscal 2018, up from the prior view of $3.95-$4.15.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Macy's has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Macy's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.