Home » Business

The TJX Companies, This Is What A Buying Opportunity Looks Like

Published on

The TJX Companies Confirms Support At Bottom Of Range

Get The Full Henry Singleton Series in PDF

Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q4 2021 hedge fund letters, conferences and more

The TJX Companies (NYSE:TJX) is a great example of what a buying opportunity looks like. The company gave a lackluster report and sent shares through the floor but buyers were quick to step in and reverse the action. More importantly, the price action moved below a key technical level and was confirmed both by the volume and the net result of trading. The takeaway is that The TJX Company chart is confirming support at the bottom of a range and at a pivotal point in the price action story. In our view, this company is still healthy and poised for profits so the next move for share prices that investors should expect is consolidation and advance. It may take a little while for the market to get back in gear but once it does we expect to see the stock move back to the top of the range and possibly higher.

The TJX Companies Misses, Guides Weak

The TJX Companies is also an example of a trend we’ve been seeing across various industries and that is the end of COVID-19 tailwinds. The push from stimulus spending and economic reopening has done all it can and more. The Q4 revenue of $13.85 billion is up 26.6% over last year but missed the Marketbeat.com consensus estimate by $0.330 billion or 230 basis points due to the impact of Omicron, rising freight costs, and wage inflation. This is better than the 12%

On a segment basis, all operating brands saw mid-single-digit increases in revenue led by a 10% increase in the International segment. U.S. open-only comps were up 13% with open-only comps up 10% across the network. Based on our channel checks, the local TJ Maxx and posted in the previous quarter and well above the 2019 level but comes with weak guidance. The company is calling for only 1% to 3% revenue growth next year which is very close to 0%. Homegoods are as busy as ever and well-stocked.

Moving down to the earnings, the company’s operating margin contracted more than 100 points on the combination of Omicron’s impact, higher freight costs, and wages with some offset from pricing and mix. That left the GAAP EPS at $.78 or $0.13 shy of the consensus but there is a silver lining. The earnings are well above last year’s levels and evidence of cash flow the company is now returning to shareholders. The board authorized a 13% increase to the dividend for F2023 and intentions to repurchase up to $2.25 billion in stock. That puts the yield at over 1.8% and the buyback at 3.1% of the market cap.

The Analysts Are Silent About The TJX Companies Results

The 20 analysts rating The TJX Companies have been silent in the wake of the Q4 results but we expect that to change soon. Results in Q4 were weak but the company is still in a good position and we are expecting an acceleration of general activity as the mid-point of the year approaches. Until then, the Marketbeat.com consensus is a firm Buy but with a recent shift in sentiment. The only analyst commentary since the last earnings report came out days before the Q4 release and included 3 price target downgrades. This puts the Marketbeat.com consensus target at $85.44 or about 30% above the $62 level.

The Technical Outlook: The TJX Companies Is At A Bottom

Shares of TJX fell hard in the wake of the earnings report and opened with a gap greater than 10% lower than the previous session. This level was met with vigorous buying and drove price action back above the bottom of the trading range that has dominated price action for the last 15 months. This support level is also consistent with the pre-COVID highs so we expect it to be strong. Assuming the market can keep its feet under it, we see this stock consolidating at this level and possibly testing the new low. If the new low holds or a higher support level is established, shares of TJX will probably trade sideways until some rays of sunshine appear in retail land.

TJX Companies

Should you invest $1,000 in TJX Companies right now?

Before you consider TJX Companies, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and TJX Companies wasn't on the list.

While TJX Companies currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

Article by MarketBeat