If you’ve waited for a better entry point to buy TJX Companies Inc (TJX), now’s your chance.
Shares of the off-price retailer are on sale, falling more than 3% after the company issued third-quarter guidance that missed Wall Street estimates. But TJX stock, which also pays a 1.3% dividend yield, won’t be down for long.
For the quarter that ends in September, TJX sees earnings per share in the range of 83 cents to 85 cents, below the 90 cents per share analysts were looking for. This is because TJX management is anticipating wage increases will negatively impact EPS by about 3%.
But here’s the thing: The moderate profit forecast aside, TJX raised its full-year same-store sales guidance to a range of 3% to 4%, topping Street expectations of 3.8%.
You don’t raise the same-store sales forecast if the underlying business is weak. This suggests that the company, which has steadily gained market share from its competitors, sees no signs of slowing down.
Plus, with full-year EPS now in the range of $3.39 to $3.43, this puts TJX on track to grow earnings by more than 13% in fiscal 2017, which is more than twice the projected earnings growth of the S&P 500 index.
The Quarter That Was for TJX Stock
From that perspective, TJX stock is now a bargain. In other words, why get spooked about just one quarter when the long-term picture in TJX remains intact?
Oh, and by the way, TJX just logged its seventh straight quarter where it has beaten on both the top and bottom lines. In the second quarter TJX posted made a profit of $562 million, or 84 cents per share, up from $549 million, or 80 cents a year ago. Revenue grew 7% year over year to $7.88 billion, beating consensus of $7.84 billion.
The company saw growth across all of its brand segments, including HomeGoods up 5%, Marmaxx up 4%, TJX Canada up 9% and TJX International rising by 2%.
And not only did second-quarter same-store sales rise 4%, which beat consensus estimates for a 3.5% increase, this suggests TJX is smashing its rivals like Kohl’s Corporation (KSS) and Ross Stores, Inc. (ROST), where same-store sales have ranged from negative growth to up 2%.
The Bottom Line with TJX Companies
All told, you would be hard-pressed to find a better-run retail stock not named Amazon.com, Inc. (AMZN). Consumers are showing they love low-priced apparel, and TJX is still the best way to play this category.
At around $80 per share, now’s the time to buy TJX stock and hold it for the long term.
Based on fiscal 2017 estimates of $3.89 per share, TJX stock should reach $90 per share in the next 12 to 18 months, driven by strong retail spending and sustained market share gains.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
