Things To Note Ahead Of TJX Companies' (TJX) Q4 Earnings

The TJX Companies, Inc. (NYSE:TJX) is slated to release fourth-quarter fiscal 2020 results on Feb 26. The leading off-price retailer delivered a positive earnings surprise of 3% in the last reported quarter. However, the company’s earnings underperformed the Zacks Consensus Estimate by 1.6%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fourth-quarter earnings has been unchanged over the past 30 days at 77 cents per share. This suggests an increase of 30.5% from the year-ago period’s reported figure. Further, the consensus mark for revenues is pegged at $11,852 million, indicating a 6.5% rise from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for fiscal 2020 earnings stands at $2.63 per share. This suggests an increase of 24.6% from the year-ago period’s reported figure. Further, the consensus mark for revenues is pegged at $41.4 billion.

Key Factors to Note

TJX Companies has been gaining from robust comparable store sales (comps), which in turn have been benefitting from increased customer traffic at all major segments. Notably, the third quarter of fiscal 2020 marked the 21st straight period of higher customer traffic at both Marmaxx and the entire company. Consumers’ favorable response to TJX Companies’ brands and impressive merchandise assortments at reasonable prices has been a driver. Moreover, the company’s aggressive marketing and advertising campaigns through multiple mediums have been boosting traffic. Its gift-giving initiatives and loyalty card program have also been helping to improve customer engagement.

Further, TJX Companies has been benefitting from its store expansion and e-commerce growth endeavors. Its off-price model along with its strategic store locations, impressive brands and fashion products has been driving its performance, both in stores and online. On its last earnings call, management had anticipated a 3% rise in consolidated comps for fiscal 2020, wherein it expected comps growth of 3-4% at Marmaxx. Further, the company expects consolidated comps growth of 2-3% for the fourth quarter.

In fact, management earlier stated that the fourth quarter began on a strong note. Management was particularly encouraged about its holiday season opportunities. For fiscal 2020, the company expects earnings per share of $2.61-$2.63, indicating year-over-year growth of 7-8%. For the fourth quarter, it expects earnings of 74-76 cents per share.

However, TJX Companies’ gross margin has been contracting year over year for quite some time now due to elevated supply-chain costs among other factors. For fourth-quarter fiscal 2020, management expects gross margin of 27.6-27.85%, whereas it reported 27.8% in the year-ago period. Further, tariff-related impacts on goods sourced from China are likely to have impacted margins in the fourth quarter.

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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although TJX Companies carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

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:

Ross Stores (NASDAQ:ROST) has an Earnings ESP of +0.09% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco (NASDAQ:COST) has an Earnings ESP of +0.56% and a Zacks Rank #2.

Target (NYSE:TGT) has an Earnings ESP of +0.78% and Zacks Rank #3.

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