Should you buy Macy’s or Kohl’s shares after solid Q3 results?

By:
on Nov 18, 2021
  • Macy’s and Kohl’s shares on Thursday spiked after announcing their most recent quarterly results.
  • Both companies reported their FQ3 results before markets opened, beating Street estimates.
  • Macy’s now trades at a P/E ratio of 23.16, while Kohl’s equivalent is 13.09.

On Thursday, Macy’s Inc. (NYSE:M) and Kohl’s Corp (NYSE:KSS) shares rallied by more than 22% and 9.40%, respectively after reporting their most recent quarterly results. The two retail chains announced their FQ3 results before markets opened, smashing analyst expectations. So, which is the better buy?

Macy’s

Macy’s posted fiscal Q3 non-GAAP earnings per share of $1.23, smashing the average analyst estimate of $0.33. In addition, its GAAP EPS of $0.76 beat the expectation of $0.19, while revenue for the quarter increased by 36.3% Y/Y to $5.44 billion, exceeding Street forecasts by $210 million.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Macy’s also boosted its full-year 2021 revenue and earnings estimates above the consensus analyst forecasts.

Macy’s shares trade at an exciting P/E ratio of 23.16, making it a compelling option for value investors. However, analysts expect earnings to fall b 836% this year before declining at an average annual rate of 11.82% over the next five years.

Therefore, growth investors could opt for alternatives in the market.

Source – TradingView

Technically, Macy’s shares seem to have recently spiked to complete an upward breakout from the intraday chart. As a result, the stock has rocketed deep into overbought conditions, creating a perfect opportunity for a technical pullback.

Therefore, investors could target potential pullbacks at about $34.91, or lower at $31.64, while $40.82 and $44.08 are resistance levels.

Kohl’s

Kohl’s FQ3 non-GAAP earnings per share of $1.65 surpassed the average analyst estimate by $0.95, while its GAAP EPS of $1.65 outperformed the expectation of $0.45. On the other hand, revenue increased by 15.6% from last year to $4.6 billion, exceeding expectations by $330 million.

Kohls also boosted its forecasted FY2021 adjusted earnings per share from $5.80-$6.10 to $7.10-$7.30, ahead of the average for analyst expectations of $6.14.

The company’s stock trades at an exciting P/E ratio of 13.09, making it a magnificent option for bargain hunters. However, analysts expect its EPS to decline by more than 124% this year before falling at an average annual rate of 5.94% over the next five years.

Therefore, it may not be a good option for growth investors. 

Source – TradingView

Technically, Kohl’s shares seem to be trading within an ascending channel formation in the intraday chart. As a result, the stock has surged closer to the overbought conditions of the 14-day RSI.

However, given its exciting valuation, investors could target extended gains deep into overbought conditions at $64.62, or higher at 467.97, while $59.36 and $55.82 are support levels.

Kohl’s looks like the better buy

In summary, both stocks offer underwhelming growth prospects. Therefore, bargain hunters could be intrigued by Kohl’s stock more than Macy’s based on the current valuation multiples.

Invest in crypto, stocks, ETFs & more in minutes with our preferred broker, eToro.

10/10
68% of retail CFD accounts lose money