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What's in Store for The TJX Companies (TJX) in Q4 Earnings?

The TJX Companies Inc.TJX is set to report fourth-quarter fiscal 2016 results on Feb 22, before the opening bell. Last quarter, the company posted a positive earnings surprise of 4.6%.

The question lingering in investors' minds now is, whether TJX Companies will be able to post positive earnings surprise in the quarter to be reported. In the trailing four quarters, TJX Companies has outperformed the Zacks Consensus Estimate by an average of 5.87%. The current Zacks Consensus Estimate for the quarter is pegged at $1.00, reflecting a year-over-year gain of 1.35%. Analysts polled by Zacks expect revenues of $9.47 billion, increasing 5.7% from the year-ago quarter.

TJX Companies forms part of the Retail-Wholesale sector. As per the latest Earnings Preview , total earnings for the sector are expected to decline marginally by 1%, while revenue is projected to improve by 4.8%.

Let's see how things are shaping up prior to this announcement.

Factors to Consider

TJX Companies is one of the few retailers which have managed to stay afloat amid troubled waters of the retail sector. In fact, the shares of TJX Companies have declined 1% in the past six months, outperforming the Zacks categorized Retail Wholesale sector which has witnessed a decline of 3% in the same time frame. Most of the retailers are losing their market share to the online giant Amazon.com Inc. AMZN as more and more buyers are opting for the convenience of buying through the internet.

TJX Companies has been posting modest earnings and revenue growth in the past few quarters driven by improvement in consumer traffic, higher margins and solid comparable-store sales growth.

The company has reported positive comps growth in the past 30 quarters supported by higher traffic. Its fresh collection and widespread sourcing machinery has helped it maintain a loyal customer base. The trend is anticipated to continue in the to-be-reported quarter as well.

TJX Companies, Inc. (The) Price and EPS Surprise

TJX Companies, Inc. (The) Price and EPS Surprise | TJX Companies, Inc. (The) Quote

Moreover, The TJX Companies is also taking steps to rejuvenate its loyalty program. The program has been a huge success with approximately 8 million members enrolled already. Moreover, during the third quarter company has added special rewards for key segments of the program. This is expected to boost sales in the to-be-reported quarter.

However, the company is anticipated to witness a dip in margins owing to higher wages paid to laborers as announced earlier in fiscal 2016. Moreover, foreign exchange remains a concern due to weakening of many currencies against the U.S. dollar is expected to affect the fiscal fourth-quarter revenues.

Based on the guidance issued during third-quarter fiscal 2017 conference call, TJX anticipates earnings in the range of 96-98 cents per share compared with 99 cents reported a year ago. For the fourth quarter, the company expects comps growth of 1-2% over last year's strong 6% increase.

Earnings Whispers

Our proven model does not conclusively show that TJX is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass earnings estimates. However, that is not the case here as you will see below:

Zacks ESP: Earnings ESP for TJX is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.00. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: TJX currently has a Zacks Rank #3. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks in the retail companies that have both a positive Earnings ESP and a favorable Zacks Rank are:

Dollar Tree Inc. DLTR with an Earnings ESP of +0.75% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Fred's Inc. FRED with an Earnings ESP of +15.79% and a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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