Nomura Sees 14% Upside For Macy's Shares

In a report published Wednesday, Nomura analyst Robert Drbul wrote that Macy's, Inc. M fourth quarter and full year 2014 earnings per share of $2.44 and $4.40, respectively, were both ahead of his estimates and the consensus estimates.

Drbul noted that Macy's sales increased 1.8 percent year-over-year to $9.36 billion in the fourth quarter while comp sales rose 2.5 percent, including a 2 percent owned-only comp. Gross margin dipped 30 basis points to 40.3 percent in the quarter while merchandise margin declined at a similar rate. The company ended the quarter with inventory up 0.7 percent and comp inventory up 0.9 percent.

"Importantly, the company's initiatives to improve turnover appear to be tracking well, and single-view-inventory categories (dresses, shoes) were among the better performers in the quarter," Drbul wrote. The analyst added that this "bodes well" for continued rollout of SVI to more categories this year.

Drbul raised his 2015 earnings per share estimate to $4.90 from a previous $4.80 and also raised his 2016 earnings per share estimate to $5.40 from a previous $5.30.

Shares are Buy rated with a $70 price target.