Shares of TJX Corporations ( TJX 5.93% ) — more commonly recognized by shoppers as T.J. Maxx — rose by 5.9% by 10:45 a.m. ET after the company reported exceeding both sales and earnings expectations on Wednesday morning.
As the quarter began, analysts predicted that TJX would achieve earnings of $0.92 per share and generate $13.3 billion in sales. However, the company actually reported earnings of $0.96 per share, with its revenue nearing $13.5 billion.
Earnings report for TJX in the second quarter
TJX announced that its sales for the second quarter increased by 6% compared to the same period last year, with a 4% rise in sales from the same location (comps) specifically. (The remaining increase in sales resulted from the launch of new stores). The company then accelerated that relatively modest sales growth with a 50-basis-point increase in profit margins (currently at 10.9%), leading to an overall increase of 13% in net earnings.
CEO Ernie Herrman expressed great satisfaction with the company’s achievements, highlighting that sales have consistently grown by 6% this year, and comparable store sales are increasing. As a result, management has chosen to increase their forecast for the remainder of the year.
Should you consider purchasing TJX stock?
It’s interesting to note how the projections have been adjusted. The management anticipates that comparable sales will increase by just 2% to 3% in the third quarter, indicating a deceleration. However, they expect profit margins to significantly improve, reaching 11.8% or even 11.9%, which represents a sequential rise of up to 100 basis points. This growth is expected to lead to earnings of around $1.07 per share.
TJX anticipates that comparable sales for the entire year will increase by 3%, with average margins at 11.2%, and expects profits to be around $4.11 per share.
That’s all quite positive news — aside from the implications it holds for the value of the stock With a share price of $120 and a profit of $4.11, the price-to-earnings (P/E) ratio comes out to 29. This is somewhat elevated for a business with sales increasing at 6%, even though its profits are expanding at a rate in the low teens, which is roughly twice as fast.
Taking everything into account, I believe TJX is a solid company experiencing good growth, but its stock is not inexpensive. Appreciate today’s profits, investor. However, at the current price, the stock isn’t an attractive purchase.
Is it a good idea to invest $1,000 in TJX Companies at the moment?
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