NEW YORK (TheStreet) -- Shares of Macy's (M) - Get Report rallied 2.56% to $63.69 in afternoon trading today as BMO Capital Markets reiterated its "outperform" rating, saying "weakness in the stock creates a buying opportunity," after the company missed sales estimates for the fourth quarter and issued guidance below expectations yesterday.
"The rate of improvement in key productivity metrics from 2008 to 2014 is unlikely to be replicated over the next five years, and management has been discussing a peak EBITDA margin rate of 14% for the past 12 months," BMO Capital Markets said, lowering their price target to $67 from $70.
"However, we see the company making the correct organizational changes, improving its omni-channel execution with one common view of inventory, and making growth investment decisions in 2015 that could accelerate growth and meaningfully improve inventory productivity and cash flow in 2016 and beyond," BMO Capital Markets added.
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Analysts believe the investments and process changes under way continue to demonstrate that Macy's is "best in class in the mid-tier department store space and is the most leveraged to a surge in demand from an improving macro backdrop and further industry consolidation."
Earnings growth over the next five years is estimated at 9% or equal that of the S&P 500, yet the stock trades at an "attractive 22% discount to the market," analysts noted.
Analysts also see the company as having the ability to repurchase at least $8.5 billion in common stock from 2014 to 2018 or about 39% of the company's equity market capitalization.
Similarly, Nomura maintained a "buy" rating today with a $70 price target on the stock, raising 2015 earnings per share estimates to $4.90 from $4.80 and 2016 EPS estimates to $5.40 from $5.30.
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 reasonable valuation levels. 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:
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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 29.8% 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 ($4.37 versus $3.90).
- 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 22.6% when compared to the same quarter one year prior, going from $177.00 million to $217.00 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 significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: M Ratings Report