Macy's ( M ) is scheduled to release its third-quarter numbers before the market open November 14. Analysts forecast earnings of $0.13 for the quarter, down from $0.23 during the same period last year. The stock has outperformed the market in 2018, with shares rising 43.7% year to date.
M was recently trading at $37.86 down $4.13 from its 12-month high and $20.06 above its 12-month low. InvestorsObserver's Stock Score Report gives M a 91 long-term technical score and a 91 short-term technical score. The stock has recent support above $32 and recent resistance below $40. Of the 11 analysts who cover the stock 2 rate it Strong Buy, 0 rate it Buy, 8 rate it Hold, 0 rate it Sell, and 1 rate it Strong Sell, M gets a score of 77 from InvestorsObserver's Stock Score Report.
M enjoyed strong gains during the first seven months of 2018, but the stock began a weak downward trend over the summer following its last quarterly report. Last quarter Macy's posted better than expected earnings but revenues were just shy of the consensus. Same store sales were flat, and some analysts questioned whether the company's upwardly revised forward guidance was too strong for the company to hit. Overall the numbers were pretty good and some of the selling was just normal profit taking after such a strong run during the first half of the year. Even with the recent downward trend shares are up 43.7% on the year and if Macy's can deliver strong numbers for its most recent quarter you can expect to see a nice post-earnings rally. The street has a whisper number of $0.18 for the quarter which is well above the consensus $0.13 and puts even more pressure on the company to deliver strong numbers. The stock's valuation is very low with a forward P/E of 10.5, so there is a lot of upside potential, but with gains of nearly 44% on the year the low valuation will not prevent additional profit taking if the results miss expectations. The stock is trading at $37.86 and analysts have an average price target $35.45.
Stock Only Trade
If you're looking to establish a long stock position in M consider buying the stock under $38. Sell if it falls below $35 or take profits if it gets to $44.
If you want a bullish hedged trade on the stock, consider a 12/21/18 26/31 bull-put credit spread for a $0.35 credit. That's a potential 7.5% return (65.4% annualized*) and the stock would have to fall 19% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an 1/18/19 42/45 bear-call credit spread for a $0.40 credit. That's a potential 15.4% return (80.2% annualized*) and the stock would have to rise 12% to cause a problem.
Covered Call Trade
If you like the stock but wish to lower your cost basis on a new position, you may want to consider a 12/21/18 $37 covered call. Buy M shares (typically 100 shares, scale as appropriate), while selling the 12/21/18 $37 call for a debit of $35.11, per share. The trade has a target assigned return of 5.4%, and a target annualized return of 46.8% (for comparison purposes only).