Stifel Previews Macy's Q4 Results

Stifel previewed Q4 earnings for Macy's, Inc. M ahead of the company reporting its results Tuesday morning.

Analysts led by Richard E. Jaffe anticipated that “fundamental strength in the sector” would “be driven by an improved economy, a more optimistic consumer, lean inventories and lower costs helping to lift sales and margins.”

The analysts expected adjusted 4Q EPS would increase 5 percent to $2.41, $0.01 above the current consensus, versus $2.31 in the prior year period. The Street also expected $9.40 billion in revenue for Q4.

The adjusted Q4 EPS excluded $100-$110 million in “merchandising and marketing restructuring, store and field adjustments, store closing and asset impairment charges as well as $17 million of interest expense related to the make-whole premium on earlier retirement of debt,” according to the analyst note.

Macy's pre-release of its 4Q results indicated that comps increased 2 percent. Jaffe noted that the growth “was due to a compelling Holiday assortment” and “a significant improvement in trend from the Fall selling season.”

Overall, the analysts thought that “updated assortments targeted towards the millennial customer are trend-right and will help drive better results longer term.”

Investments in new technology were also cited as important to “remain relevant in a highly competitive space” and that Macy’s acquisition of Bluemercury demonstrated the company’s to willingness to make strategic investments for growth.

The firm rated Macy’s a Buy with a $70 price target based on 13x estimated 2016 EPS of $5.35.

Macy's, Inc. recently traded at $63.62, down 0.13 percent.