NEW YORK (TheStreet) -- TheStreet's Jim Cramer believes in Macy's (M - Get Report) stock despite Tumi's (TUMI) weak results and Ralph Lauren's (RL) weak forecast, two companies that are integral to what is sold at Macy's stores.
But Costco (COST) and Gap's (GPS) solid numbers give Cramer more confidence and he leans toward buying Macy's ahead of its quarterly results report on Wednesday. He notes this market is so mercurial that a domestic retailer could decline on a given day and investors can then swoop in and buy it. If Macy's takes an intraday hit prior to the results, then Cramer suggests buying it.
Cramer also named Macy's CEO Terry Lundgren as one of his "21 Bankable CEOs" and believes people underestimate him. He notes Lundgren does not grow a lot of stores, but Cramer likes his OmniChannel approach and believes Lundgren is a "great merchant" and a "terrific executive" who has gotten a lot out of the company.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- MACY'S INC has improved earnings per share by 18.0% 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 $3.90 versus $3.29 in the prior year. This year, the market expects an improvement in earnings ($4.45 versus $3.90).
- The net income growth from the same quarter one year ago has significantly exceeded that of the Multiline Retail industry average, but is less than that of the S&P 500. The net income increased by 11.1% when compared to the same quarter one year prior, going from $730.00 million to $811.00 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. Compared to other companies in the Multiline Retail industry and the overall market, MACY'S INC's return on equity exceeds that of both the industry average and the S&P 500.
- 40.62% is the gross profit margin for MACY'S INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.81% is above that of the industry average.
- You can view the full analysis from the report here: M Ratings Report