The TJX Companies Is A Retailer You Can Buy
Earnings from the retail sector have been robust this quarter and The TJX Companies (NYSE: TJX) is participating in the trend. The company not only reported better than expected earnings but gave an indication business trends were still advancing. While the company did cut its dividend during the pandemic, we aren’t faulting it for the move because today the business is stronger than ever and with as healthy an outlook for dividend increases that we’ve ever had. With retail trends expected to remain strong into 2022 despite rising inflation, we view The TJX Companies as a high-quality position for dividend-growth investors to ride out the next year.
The TJX Companies Unaffected By Supply Chain Disruptions
The TJX Companies may have been hit by supply chain challenges but they make little mention of it in the report. In fact, as far as we can tell there is little evidence of any problems within the report at all, other than the lingering impact of COVID-19. Because the company’s revenue growth was near 0.0% in last year’s Q3, and because the 2-year comparison has become so important, all of the comparisons in the Q3 report are versus fiscal 2020 and they are good comps. The TJX Companies reports $12.53 billion in net revenue which is not only up 20% from last year but is also a company record and beat the Marketbeat.com consensus by 230 basis points.
Revenue strength is due to robust results in all segments with notable strength in the Homegoods and core TJ Maxx channels. On an open-only comp-store basis sales are up 14% and tracking at that level in the first few weeks of the 4th quarter. Moving down to the margin and earnings, the company was able to increase profit by 23% versus 2-years ago, in tandem with revenue growth, and drive GAAP earnings above the consensus figure. The GAAP $0.84 beat the analyst’s average by $0.04 and puts the company on track to outperform for the year as well. Looking forward, execs declined to give formal guidance but increased the buyback program by $500 million or about 0.6% of the market cap. We take that as a positive sign revenue and earnings will be above expectation.
"We are extremely well-positioned for the holiday selling season," commented CEO Ernie Herrman. "We are in an excellent inventory position, with most of the product needed for the holiday season either on hand or scheduled to arrive at our stores and online in time for the holidays."
The Analysts Are Pushing The TJX Companies Higher
The analysts are firmly bullish on The TJX Companies and pushing the Marketbeat.com consensus price target higher. The $82 consensus target assumes about 8.0% upside for the stock and is up 4.5% in the 90 days, 3% in the last 30. The most recent shout-out came just before the release of earnings from Barclays who maintained an Overweight rating and raised what was already the Marketbeat.com high price target to $102. That’s about 36% of upside, not counting the 1.5% dividend.
The Technical Outlook: The TJX Companies Sets A New High
The TJX Companies moved up more than 10% following the release and gapped up strongly at the open. The move set a new all-time high but resistance at the previous all-time high(s) kept the market in check. It looks like profit-taking and rotation may keep the stock in consolidation but we are bullish and see it consolidating at or near the current levels. Longer-term, shares of TJX are likely to begin moving higher soon. A definitive move to a new all-time high will be very bullish and could easily take the stock up to the $86 level if not higher.
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