As the economy continues to improve, there has been some concern that value-oriented retailers like The TJX Companies, Inc. (TJX) will lose business as consumers “trade up” to their full priced competitors.
Although its growth is not as robust as it was in 2009 and 2010, TJX continues to prove the naysayers wrong. The company delivered strong fourth quarter results and also recently posted a 3% increase in February same-store sales.
Estimates Rising
Estimates have been rising off the strong February sales numbers. The Zacks Consensus Estimate for 2012 is $3.87, equating to 11% growth over 2011 EPS. This is within management’s guidance of $3.78 to $3.93 per share.
The 2013 consensus estimate is currently $4.31, representing 11% annual growth. It is a Zacks #2 Rank (Buy) stock.
Fourth Quarter Results
TJX reported Q4 EPS of $1.05 on February 23. This beat the Zacks Consensus Estimate by 3 cents and was a 12% increase over the same quarter last year.
Net sales for the quarter were $6.3 billion, a 7% increase year-over-year. This was driven by a 2% increase in same-store sales (on top of a 12% increase last year). Same-store sales in Europe fell 6%, however.
Operating income rose 7% as the operating margin expanded from 10.7% of sales to 11.2%.
Solid Fundamentals
TJX produces strong free cash flows and has been rewarding shareholders through stock buybacks and dividend increases. The company spent approximately $1.193 billion in 2011 buying back stock, on top of $945 million in 2010.
TJX has also been aggressively raising its dividend. It has hiked it every year for the last 15 years and has increased it at a compound annual rate of 23.5% since 2000.
It also recently announced a 27% hike in its regular quarterly dividend to 19 cents per share. It currently yields 1.2%.
Attractive Valuation
The valuation picture looks attractive with shares sporting a PEG ratio of 0.9. It trades at 12.9x forward earnings, a discount to the industry average of 15.5x.
Read the October 22 article here.
This Week’s Growth & Income Zacks Rank Buy Stocks:
McDonald’s Corporation (MCD) recently posted a 3.9% increase in global comparable sales for the month of February. This prompted analysts to raise their earnings estimates, sending the stock to a Zacks #2 Rank (Buy). Read the full article.
Stryker Corporation (SYK) has a very solid balance sheet and a history of returning value to shareholders through dividend increases and share buybacks. Stryker also has a history of consistently growing its sales and earnings. Read the full article.
AvalonBay Communities, Inc. (AVB) stands to benefit from a nice tailwind for the apartment REIT industry over the next several years. The company also pays a dividend that yields 3.0%. Read the full article.
Oracle Corp. (ORCL) impressed once again, delivering its fourth consecutive positive earnings surprise on March 24. The company is financially sound too, with over $24 billion in cash, cash equivalents and marketable securities. It pays a dividend that yields 0.6%. Read the full article.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
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