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Shares of Macy's M sunk 3.40% during regular trading Tuesday in a sign that investors might be nervous about the department store giant ahead of the release of its Q3 financial results Wednesday.
Overview
Coming into Tuesday, shares of Macy’s had skyrocketed over 80% during the last 12 months as investors jumped on the bandwagon with the firm showing signs of a turnaround. Macy’s posted its third-straight quarter of comparable store sales growth last quarter and has grown its e-commerce business in the age of Amazon AMZN.
Yet, we can see that Macy’s stock has greatly underperformed the S&P 500 over the past five years. And it seems very likely that many investors simply bought the massive Macy’s dip last November.
Q3 Outlook
Macy’s third-quarter revenues are projected to pop by 1.91% to reach $5.38 billion, based on our current Zacks Consensus Estimate. Plus, Macy’s Q3 comparable store sales are projected to climb 2.2%, based on our current NFM estimates. This, however, comes after comps fell 3.6% in the year-ago quarter.
Meanwhile, the firm’s adjusted quarterly earnings are projected to tumble 43.5% to hit $0.13 per share. With that said, we still need to know how likely it is that Macy’s is able to top our quarterly earnings estimate.
Luckily, we can turn to our exclusive Earnings ESP figure to do so. The Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
Macy’s is currently a Zacks Rank #2 (Buy) based on its recent upward earnings estimate revisions. The company also sports an Earnings ESP of +20.0%. Therefore, investors can reasonably expect that Macy’s might top our quarterly earnings estimate Wednesday. Plus, the retailer has beaten our quarterly earnings estimates in eight out of the last 10 periods.
Macy’s is scheduled to report its Q3 financial results before the market opens Wednesday. Fellow department stores J. C. Penney JCP and Nordstrom JWN report their quarterly financial results on Thursday.