UBS Cuts Price Target on Macy's (M) to $33 Following 1Q Report
UBS maintained a Neutral rating on Macy's (NYSE: M), and cut the price target to $33.00 (from $41.00), following the company's 1Q earnings report. Macy's reported better-than-expected GM at +10bp, compared to the Street at -80bp. Management said 2Q is unlikely to improve. EPS guidance was cut by ~15% to $3.15-$3.40 from $3.80-$3.90.
Analyst Michael Binetti commented, "Macy’s cut 2016 SSS guidance to -3% to -4% vs. -1% prev., but lowered EPS guidance by ~15% to $3.15-$3.40 from $3.80-$3.90. 1Q GM was better-than-expected at +10bp YOY (UBSe: -125bp, Street -80bp)—boosted by a favorable YOY shift in timing of markdown allowances from vendors. 1Q SG&A deleverage was worse-than-expected (160bp vs. UBSe 40bp)—which suggests to us cost cuts could be getting tougher to find. Importantly, like LB & GPS, M said 2Q is unlikely to improve (2-yr SSS trends expected to continue—we estimate 2Q SSS -4.5% YOY incl. licenses). Adj debt/EBITDAR reached 3.1x (vs. target: 2.5x-2.8x)—increasing our concern that share repos could slow further (1Q was the slowest sequential share ct reduction since ’11)."
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Shares of Macy's closed at $31.38 yesterday.