Macy's Receives Mixed Analyst Reaction After Q3 Earnings Beat, Sales Miss

Macy's Inc (NYSE: M) shares were trading down more than 3 percent Thursday, one day after reporting a third-quarter sales miss.

The retailer delivered Q3 earnings of 27 cents per share, beating estimates by 13 cents. Sales fell short, coming in at $5.404 billion and missing estimates by $6 million.

Analyst Takes 

Macy's sell-off is a buying opportunity, saying the company's retail innovations and initiatives will continue to drive growth in a highly competitive environment, Tigress Financial Partners' Ivan Feinseth said in a note.

The company has significant upside potential from current levels and is expecting a strong holiday season, he said. 

"While expectations may have been significantly elevated into the earnings announcements, I still view the results as very strong and continue to highlight Macy’s as one of my top retail picks for the upcoming holiday season." 

Deutsche Bank analyst Paul Trussell raised the firm's price target on Macy's from $35 to $38 and maintained a Hold rating following the quarterly print. 

Investors concerns around 2019 are overshadowing a solid report, the analyst said. 

"Investors remain focused on the tough comp compare in 4Q, which faces a slight headwind given tourism and the calendar shift in 2017, as Macy's is reporting comps on a fiscal basis." 

Bank of America Merrill Lynch analyst Lorraine Hutchinson reiterated a Neutral rating and $39 price target.

Macy's drove impressive 3-percent comp growth in Q3, but the flow through to earnings was hampered by investments, the analyst said. The company is investing $200 million in its Growth50 initiative, an experimental retail strategy offering expanded curated merchandise to 50 key locations, she said. 

"Sustaining positive comps becomes tougher from here, and we think benefits from new initiatives are balanced by a need to invest, constraining margins and EPS growth." 

The Price Action

Macy's shares were down 3.43 percent at $32.08 at the time of publication Thursday.

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