Back to top

Bull of the Day: BJ's Wholesale Club Holdings, Inc. (BJ)

Read MoreHide Full Article

BJ's Wholesale Club Holdings, Inc. ((BJ - Free Report) ) shares have surged over the last year to top warehouse club rival Costco and crush the S&P 500. BJ’s Wholesale’s outlook appears strong and it could be set to extend its outperformance as consumers across the U.S. look to save money where they can.

BJ stock recently broke back above two key moving averages after suffering a pullback from its mid-November peaks. And these are just some of the reasons why BJ's Wholesale is Monday’s Bull of the Day.

Shining in a Key Retail Space  

BJ’s Wholesale is one of the leaders in the warehouse retail club space, with most of its locations primarily on the east coast. The retailer is a one-stop shop for consumers, selling everything from perishable products and an assortment of grocery items to TVs and furniture, as well as gasoline and various services.

BJ’s Wholesale is able to offer what it boasts are “25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors” through its membership fees. The company’s basic Inner Circle membership fee costs $55 a year, while its Perks Rewards, which includes extras such as cash-back offerings, runs $110 per year at the moment. BJ’s Wholesale also offers Business memberships.

BJ’s Wholesale first began its operations in the New England area back in the mid-1980s, with roughly 235 stores across nearly 20 states today. The firm boasts that is has over 6.5 million members. Plus, it is expanding its in-house logistics and warehouse unit as it prepares to better compete against the likes of Amazon, Costco ((COST - Free Report) ), Walmart, and others.

Zacks Investment Research
Image Source: Zacks Investment Research

Growth Outlook

BJ’s Wholesale, like Costco, is able to keep its costs rather low and highly attractive to customers, even during 40-year high inflation, because of its membership fees. The company’s membership fee income climbed by 9% during its Q3 FY22 to $99.5 million.

BJ's Wholesale topped our Q3 earnings estimates in November and more importantly lifted its outlook even as most companies across the entire economy lowered their guidance. BJ’s Wholesale’s fiscal 2022 revenue is projected to climb 16% to $19.37 billion to help lift its adjusted earnings by 16.6% to $3.79 per share, based on Zacks estimates.

The company is then projected to expand its top-line by another 6% in 2023 and post higher adjusted earnings as well. This expected expansion would come on top of BJ's Wholesale’s 8% sales growth in 2021 and 17% in 2020.

BJ's Wholesale’s earnings outlook has climbed steadily higher over the last few years. Plus, the company’s most Accurate Zacks Estimates (which are the newest) come in well above the current consensus. For instance, its Most Accurate Zacks estimates for Q4 FY22 and Q1 FY23 are 18% higher than the consensus at the moment, with full-year fiscal 2023's figure 10% stronger.

BJ's Wholesale has also crushed our bottom-line revisions by 18% in the trailing four quarters. Better still, BJ has topped our EPS estimates every quarter since it went public back in 2018.

Zacks Investment Research
Image Source: Zacks Investment Research

Other Fundamentals

BJ shares have climbed nearly 200% since its debut to blow away the S&P 500’s 50% during this stretch and crush Costco’s 140%. The stock is also up 230% in the last three years and 60% during the trailing 24 months vs. the benchmark’s 6% climb and its Zacks Econ sector’s 34% drop.  

BJ is down roughly 13% from its November peaks and closed regular trading Friday at $69.70 per share. This gives the stock 15% upside before it runs into its current average Zacks price target. And BJ's Wholesale just recently broke back above both its 50-day and 200-day moving averages.

On the valuation front, BJ's Wholesale trades nearly in line with its all-time median at 18.3X forward earnings, which also has it neck-and-neck with the S&P 500 right now. Plus, it marks stellar value compared to rival fellow warehouse club standout Costco’s 33.6X.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Overall, BJ's Wholesale’s positive bottom-line revisions activity helps it land a Zacks Rank #1 (Strong Buy) right now. And 10 of the 16 brokerage recommendations Zacks has are “Strong Buys” right now, alongside five “Holds.”

BJ's Wholesale proved itself during a brutal stretch for the wider stock market and its outlook appears strong, especially as most Americans look to save money at every turn. 

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

BJ's Wholesale Club Holdings, Inc. (BJ) - free report >>

Costco Wholesale Corporation (COST) - free report >>

Published in