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TheStreet Open House

What Has Macy's (M) Soaring?

NEW YORK (TheStreet) -- Macy's (M) is soaring in early morning trading on Thursday after a series of announcements after the bell a day earlier. Shares had spiked 7.1% to $55.49 by market open.

On Wednesday, the retailer reported comparable store sales, including those from departments licensed to third parties, rose 4.3% over November and December, the key holiday shopping season months.

"Even in a questionable macroeconomic environment with challenging weather in multiple states, the positive response from our customers during the holiday season is yet another vote of confidence that our well-established strategies continue to work for us," said CEO Terry J. Lundgren in a statement.

The company also maintained its prior full-year earnings guidance to between $3.80 and $3.90 a share and said it expects comparable sales growth in the second half of 2013 to be in the range of 2.8% to 2.9%. Macy's is scheduled to report fourth-quarter earnings on Feb. 25. Analysts surveyed by Thomson Reuters expect net income of $3.87 a share for fiscal 2014.

For fiscal 2015, Macy's anticipates comparable sales to increase between 2.5% and 3% and net income in the range of $4.40 to $4.50 a share. Analysts have consensus of $4.37 a share.

In a separate press release, the Cincinnati-based business said it hoped to realize approximately $100 million per year as it implements a series of cost reductions including store closings and 2,500 layoffs.

"We began five years ago with a set of business strategies that were largely untested by a national retailer of our size and scope. As the success of these strategies has unfolded, we have identified some specific areas where we can improve our efficiency without compromising our effectiveness," said Lundgren.

TheStreet Ratings team rates MACY'S INC as a Buy with a ratings score of A. The team has this to say about their recommendation:

"We rate MACY'S INC (M) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • M's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 30.55% and other important driving factors, this stock has surged by 39.36% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, M should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • MACY'S INC has improved earnings per share by 30.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MACY'S INC increased its bottom line by earning $3.29 versus $2.91 in the prior year. This year, the market expects an improvement in earnings ($3.88 versus $3.29).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Multiline Retail industry average. The net income increased by 22.1% when compared to the same quarter one year prior, going from $145.00 million to $177.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Multiline Retail industry and the overall market, MACY'S INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

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