Today's Must Read
TJX Companies' (TJX) Marmaxx Unit Solid, Freight Costs High
Canadian Pacific's (CP) Dividends Support, Fuel Costs Sting
Monday, August 15, 2022
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 12 major stocks, including The Walt Disney Co. (DIS), The TJX Companies, Inc. (TJX) and Canadian Pacific Railway Ltd. (CP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Walt Disney shares have declined -32.1% over the past year against the Zacks Media Conglomerates industry’s decline of -28.2%. The company’s profitability was negatively impacted by higher programming and production costs across Disney+, ESPN+ and Hulu. Disney’s leveraged balance sheet remains a concern.
Nevertheless, third-quarter fiscal 2022 results reflected strength in Disney+ and revival in Parks, Experiences and Products businesses. The company benefits from the growing popularity of Disney+, owing to a strong content portfolio and a cheaper bundle offering. Availability in the Nordics, Latin America and other Asian territories is helping it expand its user base.
Theme Park business is likely to gain from strong demand across both the domestic and international parks. Per capita spending increased 10% year over year, while occupancy at domestic hotels was 90% in the fiscal third quarter.
TJX shares have declined -5.3% over the past year against the Zacks Retail - Discount Stores industry’s decline of -1.8%. The company is battling higher freight costs, which hurt its merchandise margin in the first quarter. For fiscal 2023, management is projecting 150-160 basis points incremental freight expense.
The company is also grappling with higher selling, general and administrative expenses, which was witnessed in the fiscal first quarter. TJX’s off-price business model, strategic store locations, impressive brands and fashion products are upsides.
Further, its Marmaxx division delivered comp-store sales growth of 3% in the first quarter of fiscal 2023, driven by increased customer traffic. It has been benefiting from its solid store and e-commerce growth efforts. Its treasure hunt shopping experience is gaining traction among shoppers.
Canadian Pacific Railway shares have outperformed the Zacks Transportation - Rail industry over the past year (+14.6% vs. +7.3%). The buyout of Kansas City Southern, completed last year, is a huge positive and should aid results in the coming quarters. Canadian Pacific's efforts to pay out dividends to its shareholders even in such challenging times also deserve praise.
However, the company’s dispute over the pay-related contract with a labour union, the Teamsters Canada Rail Conference (TCRC) — Train and Engine Negotiating Committee — induced a work stoppage at Canadian Pacific. The disruption worsened the already bad supply-chain situation in Canada.
The strike disrupted shipments of key items like grains and fertilizer. Thankfully, the work stoppage ended on Mar 22 following an agreement between the company and TCRC to enter into binding arbitration. Increasing fuel expenses (up 69.7% year over year in second-quarter 2022) are hurting the bottom line.
Other noteworthy reports we are featuring today include Air Products and Chemicals, Inc. (APD), Dow Inc. (DOW) and Pembina Pipeline Corp. (PBA).
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>