TJX Q3 Earnings: Can TJX Hit Its $0.66 EPS Target?

in EARNINGS/INVESTING IDEAS by

The TJX Companies, Inc. (NYSE:TJX) is a large-cap stock with a market capitalization of $71.992 billion and a total enterprise value of $81.137 billion. The company operates in the Consumer Discretionary sector and Specialty Retail industry.

TJX is scheduled to report Q3 earnings results on November 19, 2019. The company is expected to report earnings of $0.66/share on revenue of $10.305 billion. The consensus earnings per share (EPS) of $0.66/share is based on a poll of 24 analysts and represents a growth of 4.8% over the same quarter last year when the company reported earnings of $0.63/share.

The revenue forecast of $10.305 billion based on a poll of 24 analysts implies a year-over-year (YoY) growth of 4.9%. Last year the company reported $9.826 billion in revenue for the quarter.

Expected to report EPS growth of $0.03/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $10,304.57 $9,825.76 4.9%
EPS $0.66 $0.63 4.8%

In the last investor presentation, management highlighted the following strengths for the company that make it well-positioned in today’s retail environment:

  • World-class buying organization
  • Global supply chain and distribution network
  • Leveraging global presence
  • One of the most flexible retailers in the world

Historically, TJX has been able to consistently return capital to investors:4cUd0oRi13

Source: IR Handout

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters and met expectations 3 quarters.

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.62 $0.62 0.0% Meet
Q1, 2020 $0.55 $0.57 3.6% Beat
Q4, 2019 $0.68 $0.68 0.0% Meet
Q3, 2019 $0.61 $0.63 3.3% Beat
Q2, 2019 $0.53 $0.58 11.4% Beat
Q1, 2019 $0.51 $0.56 10.8% Beat
Q4, 2018 $0.64 $0.65 2.4% Beat
Q3, 2018 $0.50 $0.50 0.0% Meet

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending August 3, 2019, the stock price reacted by increasing by 3.8%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-20 $51.55 $53.50 3.8% Increase
2019-05-21 $52.97 $51.72 -2.4% Decline
2019-02-27 $49.72 $51.29 3.2% Increase
2018-11-20 $48.96 $46.16 -5.7% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of – the model suggests the company is a possible earnings manipulator. A value of – implies a – chance of earnings manipulation.

Fundamentals And Technical Analysis

TJX is currently trading at $59.55/share, down -0.5% for the day. The company is trading at approximately 97.8% of its 52-week high of $60.89/share. The company’s stock price is up 15.5% since the last earnings report and up 0.3% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 58.65 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 23.4x and a forward P/E multiple of 22.4x. TJX’s current share price also implies a price-to-book (P/B) multiple of 13.5x. The following table summarizes some other key fundamental ratios:

Data as of November 18, 2019
Metric Value
Last Fiscal Period FY2020.Q2
Period End Date August 3, 2019
Stock Price (Current) $59.55
P/E Ratio 23.4x
P/E Ratio (Fwd) 22.4x
PEG Ratio 3.5
Total Debt to Capital (%) 13.7%
Levered Free Cash Flow $2.298 billion
Enterprise Value / EBITDA 15.9x

Company Profile: The TJX Companies, Inc.

The TJX Companies, Inc. operates as an off-price apparel and home fashions retailer. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International.

The company sells family apparel, including footwear and accessories; home fashions, such as home basics, furniture, rugs, lighting products, giftware, soft home products, decorative accessories, tabletop, and cookware, as well as expanded pet, kids, and gourmet food departments; jewelry and accessories; footwear; and other merchandise.

It operates stores under the T.J. Maxx, Marshalls, HomeGoods, Winners, HomeSense, T.K. Maxx, and Sierra Trading Post names, as well as operates e-commerce sites tjmaxx.com, tkmaxx.com, and sierratradingpost.com.

The company operates approximately 4,300 stores in the United States, Canada, the United Kingdom, Ireland, Germany, Poland, Austria, the Netherlands, and Australia. The TJX Companies, Inc. was founded in 1956 and is headquartered in Framingham, Massachusetts.

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