Option Trade 
Macy's, Inc. (NYSE:M) Calls 
Monday, May 10, 2015

**OPTION TRADE: Buy the M Aug 2015 70.000 call (M150821C00070000) at or under $1.85. Place a protective stop loss at $0.70, and a pre-determined sell at $3.50.

by Ian Harvey

May 10, 2015

Introduction

Macy's, Inc. (NYSE: M), an omni-channel retail company, is set to announce its earnings results on Wednesday, May 13th, before the opening bell. Macy's has set its FY16 guidance at $4.70-4.80 EPS.

Macy’s stock, though volatile now, is likely to trade higher after it releases first-quarter earnings – and is also likely to trade higher into these numbers.

Technical Details

Macy's closed at 65.94 on Friday. Macy's has a one year low of $54.84 and a one year high of $69.98.

The stock’s 50-day moving average is $66.00 and its 200-day moving average is $63.00.

The company has a market cap of $22.49 billion and a price-to-earnings ratio of 15.63.

Earnings

Macy's last announced its earnings results on Tuesday, February 24th. The company reported $2.44 earnings per share for the quarter, beating the analysts’ consensus estimate of $2.38 by $0.06. The company had revenue of $9.36 billion for the quarter, compared to the consensus estimate of $9.40 billion.

During the same quarter last year, the company posted $2.31 earnings per share. Macy's’s revenue was up 1.8% compared to the same quarter last year. On average, analysts expect Macy's to post $4.75 EPS for the current fiscal year and $5.21 EPS for the next fiscal year.

Earnings Growth

If analysts are on target, the giant department store operator will see slightly higher earnings growth than the prior quarter.

Macy's operates about 885 stores in 45 states, the D.C. area, Guam and Puerto Rico under the brands Macy's, Bloomingdale's, Bloomingdale's Outlet and Bluemercury, as well as the macys.com, bloomingdales.com and bluemercury.com websites.

Analysts polled by Thomson Reuters see first-quarter earnings rising 3.3% from the prior year to 62 cents a share.

They expect a 0.6% increase in revenue to $6.32 billion. That would be a slower pace than the 2% rise in the prior quarter.

Moving Forward

American Icons

Macy’s, declared the return of “American Icons,” launching this week in celebration of the American landscape and the people, places and things that make this country great. The campaign will kick off with #AmericanSelfie, a social media initiative inspiring customers to share photos of what America means to them, in addition to fashions from celebrated designers and icons, in-store events and a special program in support of America’s veterans.

“American Icons is a meaningful program that offers Macy’s a chance to connect with our customers in celebration of our great country,” said Martine Reardon, Macy’s chief marketing officer. “With #AmericanSelfie, they can show us why they love America while supporting Got Your 6, a nonprofit organization that serves to empower veterans and strengthen communities. We are also rolling out the latest fashion from the country’s most beloved brands and hosting fun summertime events to make this year’s tribute to America more special than ever.”

Macy’s Backstage

Macy’s, Inc. reported that the first four pilot stores in Macy’s new off-price business, one of the company’s key growth initiatives, will open in fall 2015 in metro New York City. To be called Macy’s Backstage; the four off-price stores will average about 30,000 square feet and offer a compelling assortment of women’s, men’s and children’s apparel, shoes, fashion accessories, house wares, home textiles, intimate apparel and jewelry.

Analysts Opinions

Macy's (NYSE:M) was upgraded by Zacks from a “sell” rating to a “hold” rating in a research note issued last Tuesday.

Zacks’ analyst wrote….

“Despite witnessing an earnings beat in fourth-quarter fiscal 2014, Macy’s provided a cautious outlook for fiscal 2015. Analysts attribute the holiday season, which was soft for Macy’s, to lower-than-expected sales. Moreover, Macy’s top-line performance throughout the full fiscal shows that it posted lower-than-expected sales in all the four quarters. In the trailing four quarters, sales fell short of the Zacks Consensus Estimate by an average of 1.5%. However, Macy’s has undertaken extensive restructuring in an attempt to augment sales, profitability and cash flows. This will also result in cost savings, which the company plans to use for developing omni-channel capacities, building superior security infrastructure and enhancing direct-to-consumer fulfillment capacity.”

The company has also been the subject of a number of other research reports:-

• Analysts at Deutsche Bank reiterated a “buy” rating and set a $71.00 price target on shares of Macy's in a research note on Friday, May 1st.

• Analysts at Stifel Nicolaus raised their price target on shares of Macy's to $75.00 in a research note on Monday, April 13th.

• Analysts at Buckingham Research upgraded shares of Macy's from a “neutral” rating to a “buy” rating and raised their price target for the stock from $68.00 to $82.00 in a research note on Friday, April 10th.

• Finally, analysts at Vetr upgraded shares of Macy's from a “hold” rating to a “buy” rating and set a $61.74 price target on the stock in a research note on Wednesday, March 11th.

One research analyst has rated the stock with a sell rating, eight have issued a hold rating and twelve have issued a buy rating to the stock. The company presently has an average rating of “Buy” and an average price target of $68.00.

Conclusion

We have had great success with Macy’s in the past …. 23rd March, 2015…. 23rd February, 2015.…therefore, this streak of earnings profit will surely continue!

Therefore, based on the facts above the following options trade is recommended…..


**OPTION TRADE: Buy the M Aug 2015 70.000 call (M150821C00070000) at or under $1.85. Place a protective stop loss at $0.70, and a pre-determined sell at $3.50.



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Options traders win because they are successful.



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