It has been more than a month since the last earnings report for TJX Companies, Inc. (NYSE:TJX) . Shares have added about 8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
TJX Companies Q3 Earnings & Sales Up Y/Y, Comps Flat
TJX Companies reported third-quarter fiscal 2018 results, wherein the company’s earnings of $1.00 per share came in line with the Zacks Consensus Estimate and also met the higher end of management’s guidance range. Further, the bottom line grew 10% from adjusted earnings of 91 cents in the year-ago period. Notably, currency translations had a 4 cents positive impact on earnings per share.
Net sales advanced 6% year over year to $8,786.2 million, backed by improved traffic. Also, currency translations benefited consolidated net sales growth by 1%. However, the figure missed the Zacks Consensus Estimate of $8,876 million.
TJX Companies' consolidated comps remained flat year over year, in comparison with 3% rise witnessed in the preceding quarter. Results were affected by hurricanes, with demand for apparel at the Marmaxx division also being hurt by warm temperatures in the United States. Nonetheless, trends at the division improved eventually as weather normalized. Further, the company witnessed greater traffic and transactions at all major segments.
Segment-wise, comps rose 3%, 4% and 1% respectively, in HomeGoods, TJX Canada and TJX International segments. On the contrary, comps slipped 1% at Marmaxx.
Gross margin expanded 0.3 percentage points to 29.8%, thanks to gains from inventory hedges and enhanced merchandise margins. This was partly offset by greater supply chain expenses and expense deleverage on flat comps.
However, selling, general and administrative costs, as a percentage of sales, increased 0.5 pp to 18.1% due to increase in wages and costs associated with hurricanes. TJX Companies' consolidated pre-tax profit margin dipped 0.1 pp (from adjusted pre-tax margin) to 11.6% of sales. High wages have been a hurdle for the company for a while now.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $2,364.2 million, long-term debt of $2,229.8 million and total shareholders’ equity of $4,645.6 million. Cash flow from operations for the first three quarters of the fiscal was $1,929.4 million.
During the quarter, the company repurchased 4.9 million shares for $350 million and paid dividends worth $197 million. For fiscal 2018, the company still expects to repurchase shares worth approximately $1.5-$1.8 billion.
During the quarter, the company opened 139 stores, taking its total store count to 4,052 stores as of Oct 28, 2017.
Q4 Guidance
TJX Companies remains encouraged about the fourth quarter, courtesy of the solid holiday season opportunities. For fourth-quarter fiscal 2018, the company expects adjusted earnings (excluding a nearly 11 cents benefit from an additional week in the quarter) in the range of $1.14-$1.16 per share, reflecting 11-13% increase from the year-ago period earnings. Wage increases are expected to hurt bottom line growth by 1%, while currency is likely to positively impact earnings growth by 1%. The company expects consolidated comps growth of 1-2% in the fourth quarter.
Fiscal 2018 Guidance
For fiscal 2018, TJX Companies raised the lower end of its earnings guidance. The company now projects adjusted earnings per share in the range of $3.80-$3.82, compared with the prior range of $3.78-$3.82. The adjusted guidance (excluding benefit of 11 cents from the 53rd week in fiscal 2018) will represent an 8% increase from the year-ago period earnings. While wage increases are expected to negatively impact earnings growth by 2%, the change in accounting rules for share-based compensation will positively impact earnings growth by 1%. Also, currency is likely to have a 1% positive impact on fiscal 2018 bottom-line growth. Comps are still expected to grow 1-2% for fiscal 2018.
How Have Estimates Been Moving Since Then?
Following the release and in the last month, investors have witnessed a downward trend for fresh estimates. There has been one revision higher for the current quarter compared to two lower.
TJX Companies, Inc. (The) Price and Consensus
TJX Companies, Inc. (The) Price and Consensus | TJX Companies, Inc. (The) Quote
VGM Scores
At this time, the stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 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.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
While estimates have been moving downward, the magnitude of the revision is net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
TJX Companies, Inc. (The) (TJX): Free Stock Analysis Report
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