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TJX (TJX) Up 9.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for TJX (TJX - Free Report) . Shares have added about 9.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TJX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

TJX Companies' Q3 Earnings Beat Estimates, Sales Down

TJX Companies reported third-quarter fiscal 2021 numbers, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, earnings increased year over year. However, sales fell from the year-ago quarter’s levels.

For the first two weeks of the fiscal fourth quarter, total open-only comp store sales were down 7%. Moreover, owing to the rising uncertainty surrounding the pandemic management refrained from providing guidance.

Quarterly Details

The company reported earnings of 71 cents per share, which surpassed the Zacks Consensus Estimate of 41 cents. The quarterly earnings compares favorably with earnings of 68 cents reported in the year-ago quarter.

Net sales came in at $10,117.3 million, lower than $10,451.3 million reported in the year-ago quarter. Nevertheless, the metric surpassed the Zacks Consensus Estimate of $9,345.4 million.

Management stated that owing to temporary store closures amid the pandemic, the comp store sales definition was not applicable in the quarter under review. Thus, to offer a performance indicator for the stores as they reopen, TJX Companies has come up with a temporary new sales measure — open-only comp store sales. This includes stores that were initially classified as comp stores (in the beginning of fiscal 2021), with sales reporting done for the number of days these stores were open in the quarter under review.

Markedly, open-only comp store sales for the company fell 5% year over year. The metric declined 10%, 7% and 6% at the Marmaxx (U.S.), TJX Canada and TJX International divisions, respectively, whereas the same was up 15% in the HomeGoods (U.S.) segment.

HomeGoods segment remained strong during the fiscal third quarter. Incidentally, management plans to rollout e-commerce services on HomeGoods.com during the end of the next year to leverage its strength in the home category and capitalize on market share growth.

Other Financial Updates

The company ended the quarter with cash and cash equivalents of $10,582 million, long-term debt of $5,447.2 million and shareholders’ equity of $5,566.8 million.

During the fiscal third quarter, the company generated operating cash flow of $4.1 billion. The company expects to reinstate a quarterly dividend in the fourth quarter of fiscal 2021. It expects to announce a divided of 26 cents per share, which suggests 13% increase from previous dividend paid in March, 2020.

Total inventories as of Oct 31, 2020, were $5 billion, down from $6.3 billion in the year-ago period. The decline can be attributed to reduced planned store inventory levels, better-than-expected sales in the quarter as well as delay in merchandise delivery owing to continued bottlenecks in the supply chain. The company is concentrating its inventory purchases on categories that are witnessing higher demand since store reopening. In fact, management is optimistic about its capabilities to ship a fresh assortment of gifts to its stores and online all along the holiday season.

Store & More Updates

During the fiscal third quarter, the company opened 17 new stores in the reported quarter, taking the total count to 4,574.

Currently, the company has nearly 470 stores that are temporarily shut owing to local government mandates amid the coronavirus pandemic. Most of these closed stores are situated in Europe. Nevertheless, its online business via tkmaxx.com in the U.K. is operational amid such closures.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, TJX has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise TJX has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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