The Street Mostly Agrees: TJX Stock Is A Bargain

Off-price retailer TJX Companies Inc TJX reported second-quarter results Tuesday that were notable for EPS at the high end of guidance and comps that fell short of Street estimates.

Here's how the Street reacted. 

The Analysts

Bank of America Merrill Lynch analyst Lorraine Hutchinson maintained a Buy on TJX Companies with an unchanged $65 price target.

D.A. Davidson analyst John Morris maintained at Buy, unchanged $65 price target.

MKM Partners analyst Roxanne Meyer maintained at Buy, unchanged $62 price target.

BofA: Acceleration Ahead

TJX reported comps of 2.1% in the second quarter. This fell short of expectations, but trends showed signs of improvements in June and July, Hutchinson said in a Tuesday note.

The retailer acknowledged a "very solid start" to the third quarter, which justified a reiteration of its prior full-year EPS guidance range of $2.56 to $2.61, the analyst said. 

Any momentum seen in the third quarter looks to be sustainable through the fourth, as TJX  expects to earn 74-77 cents per share, implying 9% year-over-year growth on the low end and 14% at the high end, she said. 

Beyond the fourth quarter, TJX could see additional benefits from lower freight spot rates through fiscal 2021, as many contracts are repriced in the last quarter of the year, according to BofA. 

Related Link: Wedbush Favors Off-Price Retail, Says Nordstrom's Search Interest 'Took A Nose Dive'

DA Davidson: 4 Areas Of Upside

TJX has four catalysts that could potentially drive upside to expectations, Morris said in a Wednesday note.

They are:

• TJX acknowledged that trade tariffs create a better buying opportunity that can support merchandise margins.
• The strong start seen in June and July continued into August.
• Prior freight expense headwinds can transform to tailwinds.
• "Self-inflicted" operational woes at HomeGoods could be fixed as soon as the 2019 holiday shopping season.

MKM: Access to Inventory 'Better From Here'

One of the key takeaways from TJX's second-quarter print and MKM's conversation with management: the company's improving access to inventory across the world, Meyer said in a Wednesday note.

The retailer's access to superior inventory can only get "better from here" across all tier levels ranging from "good, better and best," the analyst said. 

TJX even highlighted its "phenomenal" access to goods in Europe, and it now sells high-tier brands that were deemed unattainable, she said. 

The company also stands to benefit from new e-commerce initiatives that bring multiple benefits, including lower demand accuracy, Meyer said. 

A stronger presence online can also bolster the company's reputation of offering best-in-class merchandise, the analyst said. 

TJX can take full advantage of the department store sector, which suffers from excess inventory, to generate upside, according to MKM. At the same time, the company can demonstrate its competitive advantage and the resiliency of the off-price model, in the sell-side firm's view. 

Price Action

TJX shares were trading higher by 2.11% at $52.64 at the time of publication Wednesday. 

Related Link: Cowen: TJX Companies' Value Proposition Improves If Chinese Tariffs Hit Retailers

Photo by Anthony92931 via Wikimedia.