UPDATE: Goldman Sachs Maintains Neutral on TJX Companies As NTM EPS Estimates Approach Peak Relative Valuation

In a report published Tuesday, Goldman Sachs analyst Stephen Grambling maintained a Neutral rating on The TJX Companies TJX and raised the price target from $64.00 to $67.00. In the report, Goldman Sachs says "TJX reiterated 4Q guidance of $0.77-$0.80 on 1%-2% comp growth, which embeds a softer comp trajectory and margin compression due to pressure from six fewer holiday selling days relative to last year and lapping a 60bp margin benefit from the 53rd week. We believe guidance will prove conservative and we currently sit $0.04 above the top end of guidance. Longer-term, TJX continues to have multiple avenues to drive EPS growth, including: 1) unit growth – upward revisions to expansion targets imply 49% growth in MarMaxx and 350% growth in Europe from today; 2) online optionality – positive initial results should spark a positive feedback loop as new brands are attracted; and 3) margin expansion – ongoing inventory management initiatives should drive margins to new peaks. Despite our favorable view of its fundamentals, the shares appear to factor in this outlook at 19.8X our revised NTM EPS estimates, which is approaching peak relative valuation at a 33% premium to the S&P 500 (vs. 3-yr average of 16%). As such, we maintain our Neutral rating." TJX Companies closed on Tuesday at $63.12.
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Posted In: Analyst ColorReiterationAnalyst RatingsGoldman SachsStephen Grambling
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