J.P. Morgan Overweight on Macy's
J.P. Morgan is out with a research report on Macy's (NYSE: M) and it has an Overweight rating and a $36 price target on shares after it reported earnings.
In a note to clients, J.P. Morgan writes, "Macy's reported 3Q EPS of $0.32, $0.15 above our $0.17 estimate and $0.16 above the Street. Stripping out 1x items ($0.05 tax benefit) and a spending shift (SG&A expenses of ~$15M out of 3Q and into 4Q worth $0.03 of EPS), the real number here is ~$0.24. The margins today will be the primary focus with gross margin coming in substantially below expectations (-49bps versus JPMe -20bps due primarily to a free shipping drag) and credit driving better SG&A performance (-2.5% vs JPMe +1.6%). Looking ahead, 4Q guidance ($1.52-$1.57) stands below the Street at $1.66 and our estimate of $1.68 given (1) tax rate of 38% (drag of $0.05), SG&A spending reversal ($0.03) and continued free shipping drag to gross margins. Given a 22% move in M over the past 5 weeks, expectations were elevated into this morning's print. While management continues to over-deliver with consistent results (18th straight beat), the sustainability of margin drivers (i.e. credit in 2012) will be the primary question today."
Shares of M are down $1.37 to $30.79, a loss of 4.26%.
