Macy's ( M ) will report its first-quarter numbers on May 16. The retailer will release its quarterly results before the market open, with the consensus calling for earnings of $0.36 per share, up from $0.24 during the same period last year. The stock has outperformed the market in 2018, with shares up 11.0% year to date.
M was recently trading at $29.20, down $3.25 from its 12-month high and $11.79 above its 12-month low. Technical indicators for M are bullish with a strong upward trend. The stock has recent support above $28.00 and recent resistance below $32.50. Of the 12 analysts who cover the stock, one rates it a "strong buy", nine rate it a "hold", and two rate it a "strong sell". M gets a score of 53 from InvestorsObserver's Stock Score Report.
Macy's has been one of the best performing retailers over the last six months, and the stock managed to dodge the earlier year sell off in the broader market and traded up to a new 52-week high in the final days of April. Macy's shattered its earnings estimate in February, and based on the street's $0.40 whisper number for the most recent quarter, traders expect to see another strong set of numbers for Macy's first-quarter. The stock has an incredibly low valuation, with a trailing P/E of 5.8 and a forward P/E of just 9.2, but the low valuations also stem from analysts expecting earnings to fall by 4.2% during the year. The good part about that number is that it is better than the recent past, where earnings have fallen by 11.2% per annum over the last five years, and analysts see continued improvement, forecasting average annual earnings growth of 18.6% for the next five years as the company continues to turn its business around. Macy's appears to be headed in the right direction, but investors should be aware of the downside risk on any negative news, as traders will quickly drive the stock lower on any perceived weakness in the company's underlying business. The stock is trading at $29.50, which is higher than its $28.30 average price target, so there is downside risk, and while conditions appear to warrant holding the stock, shareholders should also be cautious and have a clear exit strategy in place just in case the quarterly numbers disappoint.
Stock Only Trade
If you want a bullish hedged trade on the stock, consider a June 20/25 bull-put credit spread for a 35-cent credit. That's a potential 7.5% return (78.5% annualized*) and the stock would have to fall 13.2% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider a June 34/39 bear-call credit spread for a $0.40 credit. That's a potential 8.7% return (90.7% annualized*) and the stock would have to rise 17.8% to cause a problem.
Covered Call Trade
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com