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The TJX Companies, Inc. Q4 Earnings Preview: A Modest Upside Surprise In Offing

 February 26, 2013 10:30 AM
 


(By Mani) The TJX Companies, Inc. (NYSE: TJX) is set to report 30 percent growth in earnings on 14 percent increase in sales when it reports its fourth-quarter financial results on Feb.27. The company may report a modest upside surprise in earnings as it had a strong full priced selling in December and got through the holiday season with minimal clearance.

Framingham, Massachusetts-based, TJX Companies is one of the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. The company operates 1,036 T.J. Maxx, 904 Marshalls, 415 HomeGoods and 4 Sierra Trading Post stores as well as SierraTradingPost.com in the United States.

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Wall Street expects TJX to earn 81 cents a share, up from 62 cents a share it earned last year. The company sees fourth quarter earnings per share of 80 to 81 cents, a 29 to 31 percent increase over the last year. The company's profit has seen double-digit growth in the past three quarters, with an average year-over-year increase of 23 percent.

TJX earnings have beat Street view thrice in the past four quarters, with the consensus estimate improving from 76 cents to 81 cents in the past 90 days. Over the past one month, 18 analysts have raised their quarterly earnings estimate on the company.

"Our estimate is $0.80 and consensus is $0.81, but we wouldn't be surprised with modest upside of perhaps a penny to consensus," Deutsche Bank analyst Mike Baker wrote in a note to clients.

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For the full year, the average earnings estimate of analysts polled by Thomson Reuters came in at $2.54 a share, an increase of 27.60 percent from $1.99 a share in the prior year. The company expects full year earnings of $2.53 to $2.54, which would represent 25-plus percent growth over the prior year.

Quarterly revenues are projected to be $7.65 billion, up 14 percent from $6.71 billion a year-ago. The company recorded sales growth of 10.7 percent, 8.7 percent and 11.3 percent in the third, second and first quarter, respectively. Analysts expect full-year sales to rise 11.2 percent to $25.78 billion.

Comparable store sales - a key retail metric - have already been reported at 4 percent for the quarter, which on a 7 percent comp last year, equates to an 11 percent two year stacked, in line with the previous quarters' trends. For the past two quarters, TJX comps fared at 7 percent, with the first quarter comps reported at 8 percent.

In each of the last two years' fourth-quarter calls, TJX has guided the next year to 8 to 13 percent EPS growth, adjusted for the extra week. Using this year's current guidance of $2.53 to $2.54, less 7 cents from the extra week, would suggest TJX may guide 2013 earnings of $2.66 to $2.79. This compares to the current consensus of $2.83 a share.

"TJX guides to a very beatable number. Similarly, we expect TJX will guide comps to 1%-2% as they typically do. But, again, full year comps the last two years handily beat that original guidance, coming in at 4% and 7%," Baker noted.

For the third quarter, TJX's net income was $461.55 million or 62 cents a share, up from $406.49 million or 53 cents a share in the year-ago period. Net sales for the quarter rose 11 percent to $6.41 billion.

In December, TJX bought Sierra Trading Post, an off-price Internet retailer based in Cheyenne, Wyoming for about $200 million. TJX says it expects that this transaction will add to earnings beginning in fiscal 2014 but that this impact will not be material to TJX's consolidated financial statements.

Since the company reported third quarter results on Nov.13, the stock is up about 4 percent. Shares of the company, which trade at 17 times its 2013 consensus earnings estimate, have been trading between $36.50 and $46.67 during the past 52-weeks.

Wall Street analysts, in general, have a positive opinion on TJX stock, with 16 out of the 26 analysts covering TJX giving a "buy" or "strong buy" rating. The the remaining 10 analysts rate the stock as "hold." There were no "sell" ratings on the stock.

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