Macy's (M) Q1 Earnings and Revenues Surpass Estimates

Macy's reported adjusted quarterly earnings of $0.16 per share, surpassing the Zacks Consensus Estimate of $0.14, but down from $0.27 a year ago. Despite the earnings beat, Macy's shares have underperformed the S&P 500 year-to-date, declining approximately 28.9%, and the stock currently holds a Zacks Rank #4 (Sell), indicating expected underperformance in the near term due to unfavorable earnings estimate revisions. The company's upcoming quarter consensus EPS estimate is $0.32 on $4.72 billion in revenues.

Analysis

Macy's reported adjusted quarterly earnings of $0.16 per share, exceeding the Zacks Consensus Estimate of $0.14, yet this marks a significant decrease from the $0.27 per share recorded a year ago. This earnings beat, representing a 14.29% surprise, contributes to a pattern where the company has surpassed consensus EPS estimates in three of the last four quarters. Despite this, Macy's shares have substantially underperformed the broader market, declining approximately 28.9% year-to-date, in stark contrast to the S&P 500's 0.7% gain. The future trajectory of the stock price, following these results, is expected to be heavily influenced by management's commentary on the earnings call regarding future earnings expectations. Prior to this earnings release, the trend for Macy's earnings estimate revisions was unfavorable, leading to its current Zacks Rank #4 (Sell), which indicates an anticipation of near-term market underperformance. Looking ahead, the consensus EPS estimate stands at $0.32 on $4.72 billion in revenues for the next quarter, and $2.03 on $21.18 billion in revenues for the current fiscal year. Further underscoring the challenges, the Retail - Regional Department Stores sector, to which Macy's belongs, is ranked in the bottom 25% of over 250 Zacks industries, a segment historically outpaced by the top 50% of industries by a factor of more than two to one.

Key Decisions for Investors

• Investors should exercise caution, weighing the recent earnings per share beat against the substantial year-over-year decline in earnings and the significant YTD stock underperformance.
• The current Zacks Rank #4 (Sell) and the pre-existing unfavorable trend in earnings estimate revisions suggest a heightened probability of continued near-term underperformance for Macy's stock.
• Pay close attention to management's upcoming earnings call commentary for insights into the sustainability of earnings, strategic initiatives, and any revisions to the outlook, which will be critical for assessing the stock's future.
• Consider the broader industry headwinds, as Macy's operates within the poorly performing Retail - Regional Department Stores sector, which may continue to exert downward pressure on the stock.