Voting is over

​TJX's shares will reach $75 by 10.20.2015
20 september 2015

We are still upbeat about shares of TJX Companies (TJX), a major off-price retailer of apparel and home fashions. The company operates 3,461 stores in the US, Canada, Great Britain, Ireland, Germany and Poland, as well as three online-stores.

The company delivered strong results. According to the report for Q2FY16, net revenue rose by 6.5% y-o-y to USD 7.36 bn, while analysts expected an increase to USD 7.27 bn. LFL sales were up 6% y-o-y (vs. 3 a year ago) due to robust results in Marmaxx (+4%), Home Goods (+9%) и TJX Europe (+5%), TJX Canada (+12%). Operating profit climbed 6.5% y-o-y to USD 897 mn. Diluted EPS amounted to 80 cents, which means a 9.6% increase compared to adjusted EPS in Q2 2015, while the consensus was 76 cents per share. In addition, the company opened 20 new stores in the reporting quarter.

TJX generates a significant cash flow. The company generated free cash flow of USD 297 mn over six months and spent USD 855 mn for buyback. Notably, the company’s management announced a new buyback program totaling USD 2 bn in February. Quarterlydividendreached 21 cents (+20% y-o-y), yielding 1.2%.

We believe that consumer confidence and, as a result, consumer spending, will continue to grow in key markets of TJX, especially in the US, in the coming years. Against this backdrop, a successful business model, in our opinion, will allow the company to remain one of the main beneficiaries of this trend. TJX expects LFL sales to increase by 3-4%, and EPS will amount to USD 3.24-3.28, implying 3-4% growth compared to adjusted result of FY15. Taking into account the company's ability to generate significant cash flows, we also look forward to higher payments to shareholders.

We left our mid-term target price of the company’s shares unchanged at USD 80. The short-term technical target is USD 75.

Answered:
4 people

​TJX's shares will reach $75 by 10.20.2015

Voting is over
Waiting for
the right answer
Agreed
4 people
Disagreed
0 people