Will Q1 Earnings Hold A Surprise For Macy's (M) Stock?

Macy's, Inc. (NYSE:M) , one of the leading department store retailers, is slated to report first-quarter fiscal 2017 results on May 11. In the preceding quarter, the company delivered a positive earnings surprise of 2.5%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Macy's will be able to post positive earnings surprise in the quarter to be reported. In three out of the trailing four quarters, the company’s bottom-line has surpassed the Zacks Consensus Estimate. The current Zacks Consensus Estimate for the quarter under review is 35 cents, reflecting a year-over-year decline of over 12%. We noted that the Zacks Consensus Estimate has been stable in the past 30 days. Analysts polled by Zacks expect revenues of $5,473 million, down above 5% from the year-ago quarter.

Macy's forms part of the Retail-Wholesale sector. As per the latest Earnings Preview, total earnings for the sector are expected to decline by 2.2%, while revenue is projected to improve 3.3%.

Factors at Play

We believe Macy’s sustained focus on price optimization, inventory management, merchandise planning and private label offering act as the primary catalysts. In an attempt to augment sales, profitability and cash flows, the company has been taking steps such as integration of operations as well as developing eCommerce business and Macy’s Backstage off-price business. Further, it is carrying out the expansion of Bluemercury and online order fulfillment centers.

However, a competitive retail landscape, a mature domestic market and cautious consumer spending continue to pose concerns. Macy’s dwindling top-line and bottom-line results remain the primary threat for investors. A look at the performance in fiscal 2015 unveils that net sales declined 0.7%, 2.6%, 5.2% and 5.3% in the first, second, third and fourth quarters, respectively. Maintaining the same chronological order, we note that earnings per share fell 6.7%, 20%, 8.2% and 14.3%, respectively. In fiscal 2016 net sales decreased 7.4%, 3.9%, 4.2% and 4% in the first, second, third and fourth quarters, while earnings per share plunged 28.6%, 15.6%, 69.6% and 3.3% during the respective quarters.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Macy's is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Macy's has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 35 cents. Macy's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Wal-Mart Stores, Inc. (NYSE:WMT) has an Earnings ESP of +2.08% and also carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Home Depot, Inc. (NYSE:HD) has an Earnings ESP of +0.62% and carries a Zacks Rank #2.

DSW Inc. (NYSE:DSW) has an Earnings ESP of +2.94% and carries a Zacks Rank #3.

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