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

After hosting meetings with TJX Companies Inc TJX CFO Scott Goldenberg, Cowen said it's confident in the company’s earnings growth potential despite the sector’s low sentiment.

The Analyst 

John Kernan reiterated an Outperform rating on TJX with a $63 price target.

The Thesis

Following a meeting with Goldenberg, Kernan said in a Monday note that he remains confident in TJX Companies' potential for a compounded annual growth rate in the high single to low double digits. (See Kernan's track record here.) 

The high-level takeaways from the meeting include TJX's confidence in growth targets and the trajectory of the business, the analyst said. The core business is healthy and consensus estimates are conservative, he said. 

“We see investments in DCs as producing improved unit/cost economics over time. We view freight as a source of potential margin recovery in FY21. (The) stock is cheap at 17x FY21 EPS and 10.5x Expected Value/EBITDA with potential for compounding growth." 

TJX emphasized how strong the buying environment, Kernan said. 

“Our checks show TJX is in good position to take advantage of order cancelations from department stores to vendors that are accelerating into June following a very weak May environment in the full-price retail ecosystem." 

TJX’s price-to-value equation will expand if full-price retailers raise prices as a result of tariffs on goods imported to the U.S. from China, the analyst said. 

“Management noted that buyers will approach vendors carefully once they have more clarity on where pricing is going within retail." 

Price Action

TJX Companies shares were up 1.62 percent at $50.70 at the time of publication Tuesday. 

Related Links:

Freight Costs, Higher Wages Likely To Weigh On Ross Stores' Margins

Wells Fargo Calls A Peak In Discount Retail, Downgrades TJ Maxx's Parent Co.

Photo by Anthony92931 via Wikimedia

Posted In: CowenJohn KernanretailAnalyst ColorNewsPrice TargetReiterationAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.