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Macy's 1Q13 Earnings Likely to Miss

Zacks Equity Research

Macy’s, Inc. (M) is slated to report its first-quarter fiscal 2013 results before the market opens on May 15, 2013. In the last quarter, it posted a positive surprise of 3.5%. Let’s see how things are shaping up for this announcement.

Factors This Past Quarter

My Macy's localization initiatives, omnichannel integration, robust online sales and effective cost management were the driving factors in the last quarter. In an attempt to increase sales, profitability and cash flow, the company has been taking steps such as integration of operations, consolidation of divisions, customer-centric localization initiatives, as well as developing e-commerce business and online order fulfillment centers. Moreover, Macy’s continues to focus on price optimization, inventory management and merchandise planning to drive traffic.

Earnings Whispers?

Despite the efforts our proven model does not conclusively show that Macy’s is likely to beat earnings this quarter. This is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.

Negative Zacks ESP: ESP for Macy’s is -1.89%. This is because the Most Accurate Estimate stands at 52 cents, while the Zacks Consensus Estimate is pegged at 53 cents.

Zacks Rank #3 (Hold): Macy’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

The Gap, Inc. (GPS), Earnings ESP of +3.51% and a Zacks Rank #2 (Buy).

J&J Snack Foods Corp. (JJSF), Earnings ESP of +0.90% and a Zacks Rank #2 (Buy).

Zumiez, Inc. (ZUMZ), Earnings ESP of +8.33% and a Zacks Rank #3 (Hold).

Read the Full Research Report on ZUMZ

Read the Full Research Report on M

Read the Full Research Report on GPS

Read the Full Research Report on JJSF

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