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Will TJX Companies (TJX) Beat Earnings Estimates in Q3?

We expect The TJX Companies, Inc.TJX to beat expectations when it reports fiscal third-quarter 2016 results on Nov 17, before the opening bell. Last quarter, the company posted a positive earnings surprise of 5.26. In fact, the company has surpasses earnings estimates in three out of the trailing four quarters with an average positive earnings surprise of 3.29%.

Let us see what is in store for the company this quarter.

Why a Likely Positive Surprise?

Our proven model shows that TJX Companies is likely to beat earnings because it has the right combination of two key components.

Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.19%. This is a very meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank : TJX Companies has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Meanwhile, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

The combination of TJX Companies Zacks Rank #3 and +1.19% ESP makes us confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

TJX has been posting modest earnings and revenue results for the past three quarters backed by higher consumer traffic, improved margins and solid comparable-store sales growth. In fact, the Massachusetts-based company has reported the fifth consecutive quarter of sequential improvement in customer traffic. The company continued its strategy of discount pricing and improved merchandise mix, which increased traffic number over the past few quarters, and this trend is expected to continue in the to-be-reported quarter as well. Additionally, the company's global footprint would continue to drive sales.

However, the company is expected to witness lower margins due to higher labor wages as announced during the last earnings conference call. Moreover, foreign exchange headwind due to weakening of many foreign currencies against a strengthening dollar might hurt the third-quarter top line.

Other Stocks to Consider

Here are some other companies in the retail sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Five Below, Inc. FIVE , with an Earnings ESP of +14.29% and a Zacks Rank #3.

Bob Evans Farms, Inc. BOBE , with an Earnings ESP of +2.50% and a Zacks Rank #3.

Beacon Roofing Supply, Inc. BECN , with an Earnings ESP of +1.45% and a Zacks Rank #3.

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BOB EVANS FARMS (BOBE): Free Stock Analysis Report

TJX COS INC NEW (TJX): Free Stock Analysis Report

BEACON ROOFING (BECN): Free Stock Analysis Report

FIVE BELOW INC (FIVE): Free Stock Analysis Report

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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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