We're changing our price target on TJX despite the retailer's light guidance

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TJX Companies delivered strong quarterly results before Wednesday’s opening bell. While guidance was a bit below expectations, it was not overly concerning given the off-price retailer’s proclivity to under-promise and over-deliver. Revenue during TJX’s fiscal 2025 third quarter ended Nov. 2 rose 6% year-over-year to $14.06 billion, beating the LSEG-compiled consensus estimate of $13.95 billion. Adjusted earnings per share advanced 10.7% to $1.14, exceeding the EPS estimate of $1.09 per share. TJX YTD mountain TJX Companies YTD Wall Street seemed to come around to that way of thinking as shares of the company behind T.J. Maxx, Marshalls, and HomeGoods reversed their more than 2% declines from early in the session. We’re raising our TJX price target to $135 per share from $130. However, we’re keeping our 2 rating for now, meaning we would want to see a pullback in shares before considering further buys. The stock on Wednesday afternoon was only a couple of dollars below its Nov. 13 record-high close of $121. TJX Companies Why we own it : The owner of T.J. Maxx, Marshalls and HomeGoods is well-suited for the current economic environment, offering inflation-weary customers wide-ranging merchandise at compelling prices and a “treasure hunt” in-person shopping experience. Competitors : Ross Stores and Burlington Stores Last buy : May 2, 2024 Initiation : Aug. 24, 2022 Bottom line We’re willing to look past the light outlook due to TJX’s history of conservative guides and because of the Q3 strength and the opportunities management sees for further growth. In the earnings release, TJX CEO Ernie Herrman said the company’s current, fourth quarter is “off to a strong start, and we are excited about our opportunities for the holiday selling season.” TJX increased its full-year outlook on pretax profit margin and earnings per share, but both were short. Commentary The fiscal third-quarter headline sales and EPS beats were fueled by same-store sales growth in all key operating segments as customer transactions increased. Sales at Marmaxx, by far the company’s largest segment, did come up a tad short of expectations. The combined T.J. Maxx and Marshalls business unit was impacted by temporary closures resulting from hurricanes Helene and Milton. The weakness, however, was more than offset by strength everywhere else. HomeGoods, TJX Canada, and TJX International all grew faster than Marmaxx, and all beat estimates. Costs were a bit elevated. But they were more than offset by the strong sales performance, which led to better-than-expected quarterly profit margins. Cash flow generation significantly exceeded estimates. TJX returned $997 million to shareholders in the quarter. The company bought back $574 million worth of stock and paid out $423 million in dividends. Guidance TJX sees fiscal 2025 fourth quarter EPS in the range of $1.12 to $1.14, which is below the $1.17 expected. The company raised its full fiscal year 2025 outlook on EPS to $4.15 to $4.17, compared with the old range between $4.09 to $4.13. However, at the midpoint, it matched estimates. The reason we’re sanguine is that in the past 11 quarters going back to April 2022, TJX has reported earnings above the high-end of its guidance range nine times. In the remaining two instances, EPS matched the high end. That’s why it’s more important to take note of management’s upbeat tone during the conference call. Herrman said, “We continue to see outstanding availability of goods across a wide range of brands, which gives us great confidence in flowing, fresh, exciting assortments to our stores and online. This holiday season. And beyond. Longer term, we are excited about the opportunities we see to gain additional market share and continue our successful growth in the United States and internationally.” Also indicative of the management’s ability to source quality goods that resonate with consumers, Herrman said TJX is consistently seeing increased interest from shoppers between 18 and 34 years old. CFO John Klinger added that TJX’s ability to attract more customers in the cohort is a “definite plus when you think of the long-term health of the business.” We couldn’t agree more. The younger a company can capture a customer’s interest, the better chance it has of driving loyalty — and, therefore, strong lifetime value. On the call, Klinger did note that the team did not flow through the entirety of the better-than-expected third-quarter earnings results to the company’s full-year guidance because 2 cents of Q3 earnings were attributable to expenses pushed into the fiscal fourth quarter. Looking further out, management also announced its intention to expand the T.K. Maxx brand to Spain in 2026. Outside of North America, T.J. Maxx is known as T.K. Maxx. (Jim Cramer’s Charitable Trust is long TJX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

North Miami Beach, Florida, T.J. Maxx & HomeGoods discount department store, furniture display and welcome sign.

Jeff Greenberg | Getty Images

TJX Companies delivered strong quarterly results before Wednesday’s opening bell.

While guidance was a bit below expectations, it was not overly concerning given the off-price retailer’s proclivity to under-promise and over-deliver.

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We're changing our price target on TJX despite the retailer's light guidance

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