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Analyst Blog

The TJX Company Inc. (TJX - Analyst Report) is slated to report second-quarter fiscal 2014 results on Aug 20 before the opening bell. Last quarter, it posted in-line earnings. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

TJX has been posting decent comps for the past several quarters as there is high demand for it’s off price goods amid the ongoing macroeconomic challenges. Things are expected to remain the same for the upcoming quarter and we expect TJX to post another quarter of positive comps in the second quarter.

However, we are concerned about the downward pressure on margins due to the unusually high inflation leading to high cost of sales for the company. TJX has opened a number of stores across Europe and Canada and the maintenance of so many stores is increasing the operating cost for the company, thereby pressurizing the profit for the coming quarter. Moreover, being a discount retailer, TJX cannot increase its price to match the higher costs as it will reduce sales. 

Earnings Whispers?

Our proven model does not conclusively show that TJX is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Expected Suprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) of TJX is 0.00%.

Zacks Rank #3 (Hold): TJX carries a Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 (Hold), when combined with a 0.00%ESP, makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies worth considering as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Pilgrims Pride Corporation (PPC - Snapshot Report)), Earnings ESP of +35.09% and a Zacks Rank #1 (Strong Buy)

Tyson Foods Inc. (TSN - Analyst Report)), Earnings ESP of +2.90% and a Zacks Rank #2 (Buy)

New York & Company Inc. (NWY - Snapshot Report), Earnings ESP of +33.33% and a Zacks Rank #3 (Hold)

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