Back to top

Image: Bigstock

Why TJX Companies Stock Should Be Part of Your Portfolio

Read MoreHide Full Article

The TJX Companies, Inc. (TJX - Free Report) is one of the few bellwethers, which has managed to stay afloat amid a challenging retail landscape. Armed with a versatile brand portfolio, the company has been taking initiatives like product innovation, marketing campaigns and sales enhancing measures to sustain momentum.

A glimpse of this Zacks Rank #3 (Hold) company’s share price shows that it increased 1.3% year to date, against the Zacks categorized Retail – Discount & Variety industry’s decline of 2.9%.

Let’s Delve Deep

TJX Companies’ product and geographic diversity helps the company to boost its top and bottom lines along with overall profitability.

In addition, TJX Companies has been aggressively expanding its stores to enhance its global footprint. Meanwhile, management is also taking actions to augment its online sales, apart from recruiting an experienced internet management team. Moving ahead, it plans to add more categories to the online shopping site and invest categorically in it to differentiate from its brick-and-mortar stores.

Alongside, TJX Companies’ persistent marketing and advertising campaigns through multiple mediums have been boosting traffic at its stores for quite some time now. Also, the company is taking several measures along with its loyalty card program to improve customer engagement. In fact, the company is also undertaking shareholder-friendly moves. Recently, it has approved a quarterly dividend hike of 20% to 31.25 cents per share.

Backed by these growth initiatives, this Zacks Rank #3 (Hold) company’s earnings have outperformed the Zacks Consensus Estimate for the ninth straight quarter when it reported fourth-quarter fiscal 2017 results. While its top line missed our estimate in the said quarter, it outpaced the same in the eight consecutive quarters. Furthermore, it posted positive comparable store sales (comps) growth for more than six years.

Moving ahead, TJX Companies expects first-quarter fiscal 2018 earnings in the range of 76–78 cents per share, compared with 76 cents reported in the prior-year period. It also projects fiscal 2018 earnings per share in the range of $3.80–$3.89.

Consequently, the Zacks Consensus Estimate for fiscal 2018 has increased 13 cents to $3.91, over the past 60 days, representing a growth of 10.7% from $3.53 delivered in fiscal 2017. However, the Zacks Consensus Estimate for first-quarter fiscal 2018 is currently pegged at 79 cents, down 2 cents over the last 60 days.
Additionally, TJX Companies faces margin pressure due to potential higher payroll and pension related costs. Wage increases are anticipated to negatively impact earnings growth by 3% in the first quarter of fiscal 2018. Also, the off-price retail nature of the company may put pressure on margins. Going forward, lack of exposure in emerging markets coupled with currency headwinds are likely to impact profitability.

Bottom Line

We believe TJX Companies has the potential to efficiently overcome these hurdles by capitalizing on its growth drivers. This makes the company an investors’ favorite. Also, it boasts a VGM Score of “A” coupled with a long-term earnings growth rate of 10.7%, which raises optimism in the stock.

Key Picks

Better-ranked stocks in the Retail-Wholesale space include Burlington Stores, Inc. BURL, The Children's Place, Inc. PLCE and Foot Locker, Inc. FL.

Burlington Stores, with a long-term earnings growth rate of 15.9% has surged a whopping 72.3% in the past one year. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children's Place, a Zacks Rank #1 stock has jumped nearly 42% in the past one year. Also, it has a long-term earnings growth rate of 8%.

Foot Locker, which carries a Zacks Rank #2 (Buy) has increased 21.5% in the past one year. Also, it has a long-term earnings growth rate of 9.7%.

Zacks' Hidden Trades

While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?

Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum... from stocks under $10 to ETF to option movers... from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>

In-Depth Zacks Research for the Tickers Above

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

The TJX Companies, Inc. (TJX) - free report >>

Published in