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Buy TJX Stock Before Q1 Earnings on Macy's, Walmart & E-Commerce Strength?

Benjamin Rains

Shares of The TJX Companies, Inc. TJX have climbed 19% in 2019 to outpace its industry’s roughly 16% climb. Now, let’s see if investors should consider buying TJX stock before its Q1 earnings results after retail bellwethers Walmart WMT and Macy’s M showed positive same-store sales growth and continued e-commerce expansion.  

Quick Overview

TJX is an off-price apparel and home décor retailer that operates roughly 4,306 stores across nine countries, including the U.S., Canada, the UK, and Germany. The firm’s brands include T.J. Maxx, Marshalls, HomeGoods, Sierra (recently rebranded from Sierra Trading Post), and Homesense. The firm is coming off a fourth quarter, which includes the vital holiday shopping season, that saw it post 6% comparable-store sales growth. CEO Ernie Herrman noted that its apparel and home categories drove the expansion, along with higher customer traffic. Full-year fiscal 2019 comps also popped 6%, above 2018’s 2% growth.

The Framingham, Massachusetts-based firm has been successful in attracting shoppers to stores and online. TJX posted double-digit e-commerce growth last year. The company operates multiple e-commerce websites, including tjmaxx.com and tjx.com, with a Marshalls offering set to launch later this year. Plus, some of its brands have grown their presence across Facebook’s FB photo and video sharing platform, Instagram, which might soon turn into a massive shopping hub.

Meanwhile, Walmart posted impressive Q1 comps and e-commerce growth as it proves it can fight off Amazon’s AMZN encroachment. Target TGT has also rolled out more of its own brands and introduced unique partnerships as it extends its digital offerings. Other retailers, such as Nordstrom JWN, Kohl’s KSS, and J.C. Penney JCP have found things a bit more challenging (also read: Previewing Department Store Stock Q1 Earnings).

Shares of TJX closed regular trading Friday at $53.04 per share, up 0.66% on the day. This marked a roughly 6.5% downturn compared to its 52-week intraday trading high of $56.64.

 

 

Q1 Outlook & Earnings Trends

Looking ahead, our current Zacks Consensus Estimate calls for TJX’s first-quarter revenue to jump 5.8% to reach $9.19 billion. This would top last quarter’s approximately 1.5% revenue growth. Furthermore, the company’s full-year revenue is projected to surge nearly 6% from $38.97 in fiscal 2019 to reach $41.29 billion.

Moving onto the bottom end of the income statement, the firm’s adjusted quarterly earnings are expected to slip 3.51% to $0.55 per share. Despite the anticipated Q1 downturn, TJX’s full-year EPS figure is projected to soar 23.7% to reach $2.61 per share.

Investors should also note that TJX has seen its earnings estimate revision activity trended upward recently. With that said, the company is coming off a Q4 miss and its overall Q1 consensus estimate has remained the same over the course of the period.

 

 

Bottom Line

TJX is currently a Zacks Rank #2 (Buy) based, in large part, on its positive longer-term earnings estimate revision activity. And before last quarter’s bottom-line miss, the firm had been on a stellar run of earnings beats. TJX is also trading at 19.6X forward 12-month Zacks Consensus EPS estimates at the moment. This marks a discount compared to its industry’s 20.3X average and nearly matches its 10-year median.

On top of that, the firm announced in April that it raised its quarterly dividend to $0.23 per share, up 18%. TJX’s currently pays an annualized dividend of $0.92, with a 1.75% yield. Plus, investors should know that the company plans to repurchase between $1.75 to $2.25 billion worth of its own stock in fiscal 2020.  

With all that said, buying stocks before earnings can be a gamble as quarterly projections aren’t guarantees and it is never clear how Wall Street will react to a report even if it’s “strong” or better-than-expected.  

TJX is scheduled to release its Q1 fiscal 2020 financial results before the opening bell on Tuesday, May 21. Make sure to come back to Zacks for a complete breakdown of the firm’s actual quarterly earnings results. 

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