NYSE: M
MACYS INC
Report created Aug 18, 2015 Page 1 OF 6
Macy's Inc., which changed its name from Federated Department Stores Inc. in 2007, operates department stores under the names Macy's and Bloomingdale's. The company has offices in Cincinnati and New York.
The full company operates about 885 stores including outlets and Bluemercury makeup stores. Sales for
FY15 were $28 billion. Approximately 61% of sales come from feminine apparel, accessories, shoes and cosmetics. The men's and children's businesses represent a combined 23% of sales and home/miscellaneous about 16%. We expect the company to incrementally grow the Bloomingdale's brand with stores and outlets to serve affluent shoppers. It represents approximately 10% of sales and earnings.
Analysis by Christopher Graja, CFA, August 17, 2015
ARGUS RATING: HOLD
• Soft sales weigh on 2Q EPS
• Macy's reported 2Q earnings of $0.64 per share, down 20% year-over-year, and below our estimate and consensus, which were $0.80 and $0.76 per share, respectively. The results were also weaker than management expected.
• Second-quarter sales of $6.1 billion were down 2.6%%, and below the $6.3 billion we expected. The consensus was $6.2 billion. Comparable sales (excluding licensed businesses) were down 2.1%, which was below the StreetAccount consensus call for a 0.2% decrease.
• CFO Karen Hoguet cited four reasons for the sales weakness: slower spending in tourist-related markets; a decision to eliminate a Friends & Family sale; slower growth in 'center core' categories; and restaurants, healthcare and electronics siphoning spending from department store categories.
• The company is maintaining its earnings guidance of $4.70-$4.80, but this now includes a $250 million boost from the sale of real estate in Brooklyn. Management reduced sales guidance to a 1% decline from a 1% increase and now expects comparable sales to be down by about 0.5% compared with previous guidance for a 1.5% increase.
SELL HOLD BUY
SELL HOLD BUY
Under
Weight
Market
Weight
Over
Weight
Argus assigns a 12-month BUY, HOLD, or SELL rating to each stock under coverage.
• BUY-rated stocks are expected to outperform the market (the benchmark S&P 500 Index) on a risk-adjusted basis over the next year.
• HOLD-rated stocks are expected to perform in line with the market.
• SELL-rated stocks are expected to underperform the market on a risk-adjusted basis.
The distribution of ratings across Argus' entire company universe is: 48% Buy, 46% Hold, 6% Sell.
INVESTMENT THESIS
We expect HOLD-rated Macy's Inc. (NYSE: M) to have continued success with its 'My
Macy's' initiative, which involves tailoring service, marketing, and merchandise to fit the needs and preferences of local markets. The initiative has generally exceeded our expectations, and we expect further benefits going forward. Macy's is coaching its sales associates to interact with shoppers, ask questions, and provide advice that is intended to encourage incremental purchases and repeat business.
Macy's is also working to improve its multichannel selling capabilities. We believe this will be an important source of future growth, and note that it also helps the company to manage inventory more efficiently. We also expect the company to develop new
Pricing reflects previous trading week's closing price.
200-Day Moving Average 52 Week High: $73.61
Price
($)
52 Week Low: $62.30
Closed at $63.36 on 8/14
60
40
Rating BUY
HOLD
SELL
EPS
($)
Revenue
($ in Bil.)
0.55
0.72
3.86
0.47
2.16
0.60
0.80
4.22
0.61
2.26
0.56
0.64
0.57
4.70
( Estimate)
3.00
0.63
0.81
0.66
5.00
( Estimate)
2.93
Key Statistics pricing data reflects previous trading day's closing price. Other applicable data are trailing 12-months unless otherwise specified
Market Overview
Price
Target Price
52 Week Price Range
Shares Outstanding
Dividend
$62.95
--
$54.84 to $73.61
336.41 Million
$1.44
Sector Overview
Sector
Sector Rating
Consumer Discretionary
OVER WEIGHT
Total % of S&P 500 Market Cap.
12.00%
Financial Strength
Financial Strength Rating
Debt/Capital Ratio
Return on Equity
Net Margin
Payout Ratio
Current Ratio
Revenue
After-Tax Income
Valuation
Current FY P/E
Prior FY P/E
Price/Sales
Price/Book
Book Value/Share
Market Capitalization
Forecasted Growth
1 Year EPS Growth Forecast
11.37%
5 Year EPS Growth Forecast
8.00%
1 Year Dividend Growth Forecast
16.81%
Risk
Beta
Institutional Ownership
MEDIUM
57.7%
32.1%
5.1%
0.30
1.57
$27.90 Billion
$1.42 Billion
12.59
13.39
0.76
4.30
$14.63
$21.18 Billion
0.95
87.58%
FY ends
Jan 31
6.4
Q1
6.1
6.3
27.9
Q2
2014
Q3
9.2
Q4
6.3
Q1
6.3
6.2
28.1
Q2
2015
Q3
9.4
Q4
6.2
Q1
6.1
6.1
27.9
( Estimate)
Q2
2016
Q3
9.5
Q4
6.4
Q1
6.3
6.3
28.7
( Estimate)
Q2
2017
Q3
9.7
Q4
Please see important information about this report on page 6
©2015 Argus Research Company
Argus Analyst Report

NYSE: M
MACYS INC
Report created Aug 18, 2015 Page 2 OF 6
...Continued
merchandise and store formats to drive additional growth.
The company's valuation is supported by its ownership of about
80 million square feet of store space, including 2.2 million square feet at Herald Square in New York, approximately 2 million square feet on State Street in Chicago, and about 500,000 square feet at
Union Square in San Francisco. With real estate values in some markets approaching all-time highs, management said that it has been 'intensely studying' the potential for transactions that might monetize some of the company's real estate value.
We believe that the shares are trading at close to fair value.
Challenging industry trends, including weak foot traffic at malls, suggest that we should be cautious. An upgrade could come from an increase in our earnings estimates to support a higher valuation, from a lower market price, or from new merchandising initiatives that raised our confidence in the company's competitive position.
In considering upgrades to HOLD-rated department-store stocks, we would look very closely at Macy's as well as at
Nordstrom. Both companies have made excellent progress with their online businesses and both serve higher-income customers, which has been our preference. However, stronger job creation should start to help lower-income shoppers at stores such as Kohl's and J.C. Penney.
RECENT DEVELOPMENTS
On August 12, Macy's reported 2Q earnings of $0.64 per share, down 20% year-over-year, and below our estimate and consensus, which were $0.80 and $0.76 per share respectively. The results were also weaker than management expected.
The company is maintaining its earnings guidance of
$4.70-$4.80, but this now includes a $250 million boost from the sale of real estate in Brooklyn. Management reduced sales guidance to a 1% decline from a 1% increase and now expects comparable sales to be down by about 0.5% compared with previous guidance for a 1.5% increase.
Second-quarter sales of $6.1 billion were down 2.6%, and below the $6.3 billion we expected. The consensus was $6.2
billion. Comparable sales (excluding licensed businesses) were down 2.1%, which was below the StreetAccount consensus call for a 0.2% decrease.
Combining comparable sales and sales in licensed departments,
2Q comps were down 1.5%. In 2Q, the average unit retail price
(AUR) was down 1.3%, units per transaction were up slightly, and the number of transactions was down slightly.
CFO Karen Hoguet cited four reasons for the sales weakness: slower spending in tourist-related markets because of the strong dollar; a decision to eliminate a Friends & Family sale; slower growth in 'center core' categories, which may include fashion jewelry and watches. The fourth factor is what management sees as modest economic growth with restaurants, healthcare and electronics siphoning spending from department store categories.
The company saw continued strength in categories such as active wear, and furniture. The southern markets and western
GROWTH ANALYSIS
($ in Millions, except per share data)
Revenue
COGS
Gross Profit
SG&A
R&D
Operating Income
Interest Expense
Pretax Income
Income Taxes
Tax Rate (%)
Net Income
Diluted Shares Outstanding
EPS
Dividend
GROWTH RATES (%)
Revenue
Operating Income
Net Income
EPS
Dividend
Sustainable Growth Rate
VALUATION ANALYSIS
Price: High
Price: Low
Price/Sales: High-Low
P/E: High-Low
Price/Cash Flow: High-Low
6.4
78.2
157.4
154.1
19.5
$33.26
$21.69
— - —
— - —
8.0 - 5.2
2011
25,003
14,824
10,179
8,260
—
1,894
528
1,320
473
36
847
—
—
—
2014
27,931
16,725
11,206
8,440
—
2,678
388
2,290
804
35
1,486
—
—
—
0.9
0.6
11.3
19.2
18.8
21.0
$66.59
$50.05
— - —
— - —
9.8 - 7.3
2013
27,686
16,538
11,148
8,482
—
2,661
422
2,102
767
36
1,335
—
—
—
4.9
10.4
6.3
11.0
128.6
19.1
$54.07
$36.35
— - —
— - —
9.6 - 6.5
2012
26,405
15,738
10,667
8,281
—
2,411
458
1,968
712
36
1,256
—
—
—
5.6
27.3
48.3
47.2
75.0
18.6
$42.17
$32.28
— - —
— - —
7.4 - 5.6
2015
28,105
16,863
11,242
8,355
—
2,800
393
2,390
864
36
1,526
—
—
—
0.6
4.6
2.7
9.3
25.0
18.6
FINANCIAL STRENGTH
Cash ($ in Millions)
2013 2014 2015
1,836 2,273 2,246
Working Capital ($ in Millions) 2,801 2,962 3,143
Current Ratio 1.55
1.52
1.57
LT Debt/Equity Ratio (%)
Total Debt/Equity Ratio (%)
112.5
107.4
135.1
114.5
114.9
136.5
RATIOS (%)
Gross Profit Margin
Operating Margin
Net Margin
Return On Assets
Return On Equity
RISK ANALYSIS
Cash Cycle (days)
Cash Flow/Cap Ex
Oper. Income/Int. Exp. (ratio)
Payout Ratio
40.3
9.6
4.8
6.2
40.1
9.6
5.3
7.0
40.0
10.0
5.4
7.1
22.3
24.2
26.2
70.6
—
5.9
73.2
—
6.9
71.7
—
7.1
— 25.0
26.8
—
—
— - —
— - —
— - —
The data contained on this page of this report has been provided by Morningstar, Inc. (© 2015 Morningstar, Inc.
All Rights Reserved). This data (1) is proprietary to
Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. This data is set forth herein for historical reference only and is not necessarily used in Argus’ analysis of the stock set forth on this page of this report or any other stock or other security. All earnings figures are in GAAP.
Please see important information about this report on page 6
©2015 Argus Research Company
Argus Analyst Report

NYSE: M
MACYS INC
Report created Aug 18, 2015 Page 3 OF 6
...Continued
markets outperformed the company average and tourist markets were weak.
Second-quarter GAAP operating income was $436 million or
7.1% of sales, down 24% in dollars. The StreetAccount consensus was 8.1%. Our estimate was 8.5%. The operating margin in the second quarter fell 200 basis points from the prior year.
The gross margin of 40.9% was 10 basis points below our estimate, 20 basis points below consensus and 50 basis points below the rate in the prior-year period. As expected, gross margin was hurt by the delay in merchandise that arrived at West Coast ports, but management also had deeper-than-expected markdowns to move excess inventory.
Inventories were up 3.8%. On the 2Q call, management said that it brought in some merchandise earlier to get a jump on the back-to-school season, which appeared to be off to a good start.
Selling, general and administrative expenses were up 1.7% in dollars, to $2.06 billion, which was in line with our estimate. Costs were higher because of spending on outlets and e-commerce capabilities. SG&A increased by 150 basis points to 33.8% of sales, which was above our estimate of 32.5% and above the consensus of 32.2%.
Working our way down the income statement, we note that interest expense came to $93 million, which was slightly below our estimate and prior-year levels. The company's tax rate of 36.7% was just below the 37% we modeled.
Macy's generated $398 million in cash from operations in
1H16, versus $736 million in the prior-year period. Cash flow was hurt by lower net income and slightly higher inventories.
Macy's repurchased $552 million of shares in 2Q16 and $937 million in the first half.
EARNINGS & GROWTH ANALYSIS
We are maintaining our FY16 estimate of $4.70 per share. This reflects 2Q earnings that were $0.16 lower than we modeled. It also reflects a reduction in our 3Q estimate to $0.57 from $0.66
based on lower sales and a higher expense rate. This combined drag is offset by a previously unanticipated gain of approximately
$250 million on the sale of real estate in Brooklyn.
We are reducing our FY17 estimate to $5.00 from $5.25 per share based mostly on a reduction to our sales forecast and our expectation for less sales leverage. The average analyst estimate is
$4.93.
Our five-year earnings growth rate forecast is 8%. We think that the company can benefit from the 'My Macy's' initiative over the next few years and from a greater emphasis on businesses such as beauty, jewelry and private brands; however, in subsequent years, we expect earnings to grow by about 5%. At that point, we suspect that we will be more focused on free cash flow than on
EPS. We'll be keeping an eye on the company's capital spending plans and weighing the benefits of new investment versus returning cash to shareholders. We are encouraged that the company has been enhancing shareholder returns with dividend increases and
The graphics in this section are designed to allow investors to compare M versus its industry peers, the broader sector, and the market as a whole, as defined by the Argus
Universe of Coverage.
• The scatterplot shows how M stacks up versus its peers on two key characteristics: long-term growth and value. In general, companies in the lower left-hand corner are more value-oriented, while those in the upper right-hand corner are more growth-oriented.
• The table builds on the scatterplot by displaying more financial information.
• The bar charts on the right take the analysis two steps further, by broadening the comparison groups into the sector level and the market as a whole. This tool is designed to help investors understand how M might fit into or modify a diversified portfolio.
Ticker Company
TGT Target Corp
M Macy's Inc
JWN Nordstrom Inc
KSS Kohl's Corp
SHLD Sears Holdings Corp
JCP JC Penney Co Inc
Peer Average
20
10
0
M
KSS
10
5-yr Growth Rate(%)
Market Cap
5-yr
Growth
($ in Millions) Rate (%)
50,428 9.0
21,177
15,060
8.0
12.0
11,014
3,527
2,724
17,322
8.0
10.0
20.0
11.2
Current
FY P/E
17.6
13.4
21.1
12.2
-3.6
-7.1
8.9
15 20
Net 1-yr EPS
Margin Growth
(%)
-1.9
(%)
10.0
5.1
5.2
6.4
10.7
4.0
-5.4
-4.5
.4
9.9
35.2
48.0
20.0
Argus
Rating
HOLD
HOLD
HOLD
HOLD
HOLD
HOLD
P/E
M vs.
Market
M vs.
Sector
More Value
Price/Sales
M vs.
Market
M vs.
Sector
More Value
Price/Book
M vs.
Market
M vs.
Sector
More Value
PEG
M vs.
Market
M vs.
Sector
More Value
5 Year Growth
M vs.
Market
M vs.
Sector
More Value
Debt/Capital
M vs.
Market
M vs.
Sector
More Value
More Growth
More Growth
More Growth
More Growth
More Growth
More Growth
Please see important information about this report on page 6
©2015 Argus Research Company
Argus Analyst Report

NYSE: M
MACYS INC
Report created Aug 18, 2015 Page 4 OF 6
...Continued
share repurchases.
FINANCIAL STRENGTH & DIVIDEND
Our financial strength assessment is Medium. The company's efforts to improve profitability and the capital structure in the wake of the recession show that management is committed to maintaining and enhancing the company's financial strength.
Moody's rates the company's debt Baa2 with a stable outlook.
The S&P rating is BBB+ with a stable outlook.
The company had $843 million in cash & equivalents at the end of the second quarter, down from $1.6 billion a year earlier.
Shareholders' equity was down from the prior year at $4.8
billion. The company has used cash to repurchase shares.
At the end of the second quarter, the company had combined short- and long-term debt of roughly $7.3 billion, or 60% of capital. The company still had over $4 billion of goodwill and intangible assets, which is now less than shareholders' equity.
In late June of 2011, the company took advantage of its solid cash flow and improving balance sheet to obtain a new credit agreement with more favorable terms. That $1.5 billion facility replaced a $2 billion facility. There were no borrowings under the agreement in FY12 or FY13. In May of 2013, the company entered into a new five-year agreement with more favorable terms.
Management did not tap the revolver in FY14 or FY15.
The company repurchased $1.35 billion of its stock in FY13 and $1.6 billion in FY14. The company repurchased $1.9 billion of shares in FY15. In the 1Q16 earnings release, Macy's increased the share purchase authorization by $1.5 billion. Following $552 million of share repurchases in 2Q16, Macy's has about $1.6
billion remaining on its current authorization.
According to the FY14 annual report, Macy's owned 447 of its
823 stores, leased 267 stores, and owned 109 buildings on leased land. Almost all of the owned properties were free and clear of mortgages. In our view, the company's real estate ownership is a significant asset. The 2Q16 release lists the net value of property and equipment at approximately $7.7 billion. Approximately 35% of that value is in fixtures and equipment and not land and buildings. Argus treats Macy's operating leases as debt. We estimate the present value of leases due in the current fiscal year and thereafter at about $1.7 billion. Including the leases, the debt/capital ratio rises to about 65%, slightly above the normal range of about 50% for the retailers we cover.
Lease-adjusted debt was approximately 2.6-times EBIT plus depreciation, amortization and interest expense at the end of FY12 and 2.4-times at the end of FY13. Macy's ended FY14 at approximately 2.4 and ended FY15 at 2.3-times. We believe this is consistent with the company's BBB credit ratings.
Macy's paid total dividends of $0.53 per share in the year ended
January 2009 and $0.20 per share in fiscal 2010 after reducing the payout to conserve cash. The FY11 payout was also $0.20. When the company reported 1Q12 results, management raised the quarterly dividend to $0.10 from $0.05. In FY12, the company paid dividends of $0.35. In January 2012, the company raised the quarterly payout to $0.20 and paid FY13 dividends of $0.80. On
May 15, 2013, the company raised the quarterly payout to $0.25, effective with the June 14 payment. Dividends totaled $0.95 per share in FY14 and $1.19 in FY15. The company raised its quarterly payout by 15% to $0.36 per share in the 1Q16 earnings release. Our FY16 dividend estimate is $1.39 per share. Our FY17 estimate is $1.50.
MANAGEMENT & RISKS
Broadline retailing is a mature and highly competitive industry with growing e-commerce competition. This is doubly true for mall-based department stores. In addition to competition from other department stores, the company faces sellers of specialty apparel, discount shoes, specialty cosmetics, and home furnishings, such as Bed Bath & Beyond, Williams-Sonoma and Pottery Barn.
Lowe's and Home Depot are even selling some seasonal items and small appliances that were once the domain of department stores.
Department stores also face competition from vendors such as
Coach, Polo, Levi's. Michael Kors, Under Armour, and Nike, which are enhancing their own e-commerce platforms and selling their wares directly to customers.
To both justify premium prices and differentiate its stores from those of other retailers, the company must choose the right designer brands, styles and exclusive partnerships. It is also very important for the company to develop the right private-label merchandise; keep up with new advances in inventory management and point-of-sale technology to improve customer relationships; strengthen e-commerce and avoid costly markdowns of overstocked items. In short, it needs to stay relevant, convenient, and efficient.
Also of concern to mall-anchor department stores is the long-term decline in mall traffic. We don't rule out the need for future store closures. There have been about 40 in the last three years. On the plus side, anchor stores, like Macy's, generally have favorable rent agreements on stores they don't own.
Like all retailers, Macy's is vulnerable to a slowdown in the economy. Much of the merchandise that higher-end department stores sell is discretionary - in other words, these purchases can be deferred. When times are tough, customers might step down and buy lower-priced products from other stores, such as J.C. Penney,
Kohl's or Target. Shoppers may also consider an off-price retailer like T.J. Maxx. Another possibility is that shoppers will remain loyal to their favorite brands, but defer or limit purchases until their finances improve. In some cases designers have tried to accommodate these shoppers by offering lower price points.
Recently, however, sales at Macy's have held up better than those at Kohl's although it is difficult to determining how much of that is related to the bifurcated consumer environment and how much is related to better merchandising from the My Macy's initiative. We believe that at least some of the differential is due to better merchandising, as some of the strongest categories have been selected or expanded as a result of customer feedback.
We believe that Wal-Mart is working hard to compete with department stores in selling clothing. Although we don't expect
Wal-Mart to grab too many of Macy's core customers for shoes, purses or dressier clothing, we do think it could make inroads even against Macy's - in children's clothing as well as in some basic and casual items. Women are also pairing expensive jeans with cheap, trendy tops from retailers like H&M. An outfit like this might include expensive shoes from a designer or it could include inexpensive sandals from Walgreen or Old Navy.
Margin improvement at department stores, which boosts earnings and stock prices, is often a cyclical force. When times are good, rising sales reduce the need for clearance-related markdowns and can help a company to leverage its fixed costs. That, in turn, boosts cash flow and makes it easier to reduce debt, repurchase shares or reinvest in improvements to stores or technology. While
Macy's and some other retailers have made structural
Please see important information about this report on page 6
©2015 Argus Research Company
Argus Analyst Report

...Continued
improvements, we believe they are vulnerable in a weak consumer environment.
An increasingly important risk is information theft. If retailers can't adequately protect their customer and employee information and comply with best practices, they could see both their reputations and their finances suffer.
In our opinion, CEO Terry Lundgren has the experience and the force of will to handle the job, but he faces a daunting task in repositioning the company in a still challenging environment for retailers with a concentration of brick-and-mortar stores.
COMPANY DESCRIPTION
Macy's Inc., which changed its name from Federated
Department Stores Inc. in 2007, operates department stores under the names Macy's and Bloomingdale's. The company has offices in
Cincinnati and New York. The full company operates about 885 stores including outlets and Bluemercury makeup stores. Sales for
FY15 were $28 billion. Approximately 61% of sales come from feminine apparel, accessories, shoes and cosmetics. The men's and children's businesses represent a combined 23% of sales and home/miscellaneous about 16%. We expect the company to incrementally grow the Bloomingdale's brand with stores and outlets to serve affluent shoppers. It represents approximately 10% of sales and earnings.
VALUATION
Macy's shares have returned approximately 11% over the past
12 months. The shares are currently trading at 13.4-times our
FY16 EPS forecast and at 12.6-times our FY17 estimate. The S&P
500 is trading at about 17-times our calendar 2015 estimate. On a normalized basis, we would expect Macy's to trade at a discount to the market multiple based on the maturity of the business and the level of competition it faces.
The shares are trading at 14.7-times trailing earnings, in line with the five-year median of 14. This is below the multiple of 20 at
Nordstrom, which has a well-developed multi-channel strategy.
While we acknowledge that it is very difficult to use a dividend discount model to evaluate a company going through a business transformation, we do believe in trying to assess value through a number of different methods. Based on analysis with our multistage dividend discount model, we put the value of the shares at approximately $60s. For the sake of transparency, we often use a simple discounted earnings model that has fewer moving parts.
Based on trailing earnings, our five-year growth rate estimate of
8%, a discount rate of 9%, and a terminal P/E of 14, the shares would be worth approximately $57.
In a more optimistic scenario, the company might be able to gain significant additional benefits from the 'My Macy's' initiative and generate higher EPS growth, or growth for a longer period, through a more effective multichannel offering. In a more pessimistic scenario, the company could face additional competition from Nordstrom, Kohl's, Amazon, and specialty stores like Victoria's Secret, Forever 21 and Bed Bath & Beyond. The company could also see pressure if Amazon offers more accessories and apparel.
The company's indicated dividend yield is now approximately
2.3%.
On August 17, HOLD-rated M closed at $62.95, down $0.41.
Please see important information about this report on page 6
©2015 Argus Research Company
NYSE: M
MACYS INC
Report created Aug 18, 2015 Page 5 OF 6
Argus Analyst Report

NYSE: M
METHODOLOGY & DISCLAIMERS
Report created Aug 18, 2015 Page 6 OF 6
Argus Research, founded by Economist Harold Dorsey in 1934, has built a top-down, fundamental system that is used by Argus analysts. This six-point system includes Industry Analysis, Growth
Analysis, Financial Strength Analysis, Management Assessment,
Risk Analysis and Valuation Analysis.
Utilizing forecasts from Argus’ Economist, the Industry Analysis identifies industries expected to perform well over the next one-to-two years.
The Growth Analysis generates proprietary estimates for companies under coverage.
In the Financial Strength Analysis, analysts study ratios to understand profitability, liquidity and capital structure.
During the Management Assessment, analysts meet with and familiarize themselves with the processes of corporate management teams.
Quantitative trends and qualitative threats are assessed under the Risk Analysis.
And finally, Argus’ Valuation Analysis model integrates a historical ratio matrix, discounted cash flow modeling, and peer comparison.
THE ARGUS RESEARCH RATING SYSTEM
Argus uses three ratings for stocks: BUY, HOLD, and SELL.
Stocks are rated relative to a benchmark, the S&P 500.
• A BUY-rated stock is expected to outperform the S&P 500 on a risk-adjusted basis over a 12-month period. To make this determination, Argus Analysts set target prices, use beta as the measure of risk, and compare expected risk-adjusted stock returns to the S&P 500 forecasts set by the Argus Market
Strategist.
• A HOLD-rated stock is expected to perform in line with the
S&P 500.
• A SELL-rated stock is expected to underperform the S&P 500.
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