Should you buy Macy’s stock on strong Q4 results?

Shares of Macy’s Inc (NYSE: M) are up more than 10% on Thursday after reporting a strong fourth quarter and offering upbeat guidance for the future.

Analyst shares his view on Macy’s stock

For the full financial year, Macy’s now expects its per-share earnings to fall between $3.67 and $4.11 on up to $24.2 billion in revenue. On CNBC’s “Squawk Box”, Cowen’s Oliver Chen said:

We like Macy’s. We like the valuation. We like what it’s doing with one, inventory management, two, strong trends in beauty, three, guidance is appropriate, and four, there’s lots of initiatives for embracing the younger customer.

Experts had forecast $3.78 a share and $24.2 billion revenue, respectively. Versus its year-to-date high, Macy’s stock is still down about 5.0%.

Notable figures in Macy’s Q4 earnings report

• Net income printed at $508 million versus the year-ago $742 million
• Per-share earnings also tanked significantly from $2.44 to $1.83
• Adjusted EPS came in at $1.88 as per the earnings press release
• Sales declined nearly 5.0% on a year-over-year basis to $8.264 billion
• FactSet consensus was $1.58 of adjusted EPS on $8.234 billion revenue
• Comparable sales (owned plus licensed stores) slipped 2.7% YoY
• Net credit card revenue was about $2.0 million lower than last year

Markdowns and promotions resulted in a 240 basis points hit to gross margin in the recent quarter. Still, Chen added:

Overall, retailers that survived post pandemic now are in a stronger place. Macy’s well capitalised with a free cash flow yield of 11%. Also, the Macy’s stock valuation is about six times PE ratio. That’s inexpensive.