The Federal Reserve met broad expectations by reducing its interest rate hike to 50 bps this month. However, its emphasis on taming inflation further by raising interest rates in the foreseeable future has dampened the optimism that had kept markets buoyant in the run-up to yesterday’s announcement.
However, in the run-up to year-end festivities, consumer spending is also set to increase, thereby adding more wind to the sails of businesses that have been under pressure by aggressive interest rate hikes and other macroeconomic headwinds for a greater part of the year.
The TJX Companies, Inc. (TJX)
TJX is an off-price apparel and home fashion retailer in the United States and internationally. The company’s operating segments are Marmaxx; HomeGoods; TJX Canada; and TJX International.
TJX’s revenue has exhibited a 6.6% CAGR over the past three years. During the same time horizon, the company’s EBITDA and net income have also grown at 2% and 2.8% CAGRs, respectively.
During the nine months of the fiscal year ended October 29, 2022, TJX’s net sales increased 2.1% year-over-year to $35.42 billion. During the same period, the company’s net income increased 5% and 8.3% year-over-year to $2.46 billion and $2.08, respectively.
Analysts expect TJX’s revenue and EPS for fiscal 2023 to increase 2% and 9.3% year-over-year to $49.51 billion and $3.12, respectively. The company has surpassed consensus EPS estimates in three of the trailing four quarters.
Owing to its strong performance and solid growth prospects, TJX is currently commanding a premium valuation compared to its peers. In terms of forward P/E, TJX is currently trading at 25.41x compared to the industry average of 12.88x. Also, its forward EV/EBITDA multiple of 17.26 is higher than the industry average of 9.15. Continue reading "2 Retail Stocks Ready for a Santa Claus Rally"