The TJX Companies Inc. ( TJX ) is set to report second-quarter 2015 results on Aug 19, before the opening bell. Last quarter, the company posted 4.5% negative earnings surprise. Let's see how things are shaping up for this announcement.
Factors to Consider this Quarter
TJX Companies has been witnessing weak comps for the past few quarters due to reduced discretionary spending by consumers and unfavorable foreign currency translation. The tough retail environment existed in the second quarter as well.
Moreover, recent economic instability in Europe affected TJX Companies' aggressive expansion in the region. Its stores in Europe are expected to witness a decline in traffic as well.
Moreover, high inventory levels due to soft sales in the December and March quarters due to the inclement weather that gripped northern U.S. in early 2014 should also hurt the top line. TJX had to offer heavy discounts to clear off the stock piling which is expected to affect margins in the to-be-reported quarter.
Our proven model does not conclusively show that TJX Companies is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimate. However, that is not the case here due to the following factors:
Negative Zacks ESP: ESP for TJX is -1.37%. This is because the Most Accurate estimate stands at a loss of 72 cents a share, while the Zacks Consensus Estimate is pegged at a loss of 73 cents.
Zacks Rank: TJX currently has a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Sanderson Farms nc. ( SAFM ), with an Earnings ESP of +4.92% and a Zacks Rank #1 (Strong Buy).
Abercrombie & Fitch Company. ( ANF ), with an Earnings ESP of +20.00% and a Zacks Rank #2 (Buy).
Shoe Carnival Inc. ( SCVL ), with an Earnings ESP of +5.88% and a Zacks Rank #2.