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3 Earnings Reports to Watch Next Week

The peak of earnings season has passed — and it has been good enough for a bull market now in its ninth year. Key sectors like financials and techs have moved higher, and there has been enough strength elsewhere for the Street to stay positive and for broad markets to set new all-time highs.

The focus now turns to retailers, many of whom have fiscal years ending in January, and thus report a month later than companies reporting on the standard calendar. That change in focus could be a concern for a market trading at high multiples and with record-low volatility.

Retail after all has been the least-healthy sector over the last few years, with, Inc. (NASDAQ:AMZN) casting a shadow and U.S. consumers seeming to move toward experiences and away from merchandise.

This week, three retail bellwethers report, and will set the tone for the industry this month. Some good news could bode well for the rest of the industry. But a rough start could push investor sentiment toward the space even further south. Inc(ADR) (NASDAQ:JD) has had some choppy trading since May — but it’s set up nicely for a pop after it reports Q3 results on Monday morning.

The Chinese e-commerce retailer lags better-known Alibaba Group Holding Ltd (NYSE:BABA) in market share — but it has been gaining ground for several quarters. I’ve liked BABA going back to early this year, and its recent earnings beat shows the Chinese economy remains strong., meanwhile, has posted three straight earnings beats — though it oddly fell after a very strong Q2 report in August. The average Street target price is above $50, representing 25%-plus upside, and another beat on Monday should see a better result for JD stock.

JD isn’t cheap, at 46x next year’s consensus EPS. But its torrid growth and a recent pullback mean that a fourth-straight beat should be rewarded by the market.

I recommended TJX Companies Inc (NYSE:TJX) to my subscribers last month, and I’m sticking with that recommendation ahead of TJX’s Q3 report before the open on Tuesday.

Shares of TJX and rival Ross Stores, Inc. (NASDAQ:ROST) have stagnated over the past few years, as investors seem to be concerned that broader retail weakness will make its way to the off-price channel. But those concerns seem overblown. TJX continues to drive growth in both same-store sales and earnings. The HomeGoods concept still has plenty of room to grow its store count as well.

TJX stock would be a beneficiary of tax reform if it comes through, given its 37% tax rate. And a reasonable valuation of just 16x January 2019 EPS estimates leaves the stock cheap.

I have an $85 target on TJX, 25% upside from current levels. If Q3 earnings remind investors that TJX Companies still has years of growth — and plenty of upside — ahead of it, some of that upside should be captured on Tuesday.