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All You Should Note Before TJX Companies (TJX) Q3 Earnings

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The TJX Companies, Inc. (TJX - Free Report) is likely to register a decline in the top and the bottom line when it reports third-quarter fiscal 2021 numbers on Nov 18, before market open. The Zacks Consensus Estimate for earnings has moved up by a penny in the past 30 days to 41 cents per share. However, the bottom line suggests a 39.7% slump from the figure reported in the prior-year quarter. Markedly, TJX Companies’ bottom line has lagged the consensus mark by a wide margin in the trailing four quarters, on average.

The Zacks Consensus Estimate for revenues is pegged at $9,324 million, which indicates a drop of 10.8% from the prior-year quarter’s reported figure. Nonetheless, it looks like the rate of sales decline is likely to improve on a sequential basis. The company had witnessed a decline of 31.8% in the last reported quarter.

The TJX Companies, Inc. Price, Consensus and EPS Surprise



The TJX Companies, Inc. Price, Consensus and EPS Surprise

The TJX Companies, Inc. price-consensus-eps-surprise-chart | The TJX Companies, Inc. Quote

 

Key Factors to Note

In its second-quarter fiscal 2021 earnings call, management stated that it anticipates a 10-20% decline in open-only comparable store sales in the third quarter. This goes in tandem with the sales trends witnessed since mid-July through August (as of Aug 19). The outlook also reflects the uncertainty surrounding consumer behavior, traffic and demand amid the coronavirus pandemic, including expectations of a sluggish back-to-school selling season.

On the positive side, TJX Companies is benefiting from its e-commerce business, thanks to consumers’ increased preference for online shopping (especially amid the pandemic). The company is undertaking several initiatives to boost online sales and strengthen its e-commerce business. On its last earnings call, management notified that it has reopened more than 4,500 stores worldwide along with each of its online shopping sites. Apart from this, strength in the Home categories has been driving TJX Companies. Incidentally, the company’s HomeGoods and Homesense chains saw robust sales in the last reported quarter. The company stated that it expects market share gains when more customers restart shopping in stores.

That being said, we cannot ignore the impact of high COVID-19 costs, which put pressure on the company’s bottom line in the last reported quarter. Management expects additional COVID-19 net costs of about 250 basis points each in the third and the fourth quarter of fiscal 2021 — excluding elevated interest expenses. These costs include the ongoing payroll and employee PPE costs amid the pandemic. Apart from this, management envisions incremental freight costs as well as expenses associated with increased third party providers, which will enable TJX Companies’ North American distribution centers process goods. These factors are likely to have had affected the company’s performance in the quarter under review.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for TJX Companies this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

TJX Companies currently has a Zacks Rank #4 and an Earnings ESP of +7.80%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Best Buy (BBY - Free Report) has an Earnings ESP of +14.92% and a Zacks Rank #2.

Dollar General (DG - Free Report) has an Earnings ESP of +16.53% and a Zacks Rank #2.

Lowe’s (LOW - Free Report) has an Earnings ESP of +7.78% and a Zacks Rank #3.

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