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Jim Cramer Explains Why and When to Buy Macy's (M) Stock Ahead of Earnings This Week

NEW YORK (TheStreet) -- TheStreet's Jim Cramer believes in Macy's  (M) 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.

Must Watch: Cramer: Shop for Macy's on Any Pullback Ahead of Earnings

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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Separately, TheStreet Ratings team rates MACY'S INC as a "buy" with a ratings score of A. TheStreet Ratings 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 solid stock price performance, impressive record of earnings per share growth, increase in net income, notable return on equity and expanding profit margins. 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:

  • 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

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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