The TJX Companies Inc. (TJX) is set to report the third-quarter 2015 results on Nov 18, before the opening bell. Last quarter, the company posted a 2.7% positive earnings surprise. Let's see how things are shaping up for this announcement.
Factors to Consider
TJX Companies has been witnessing weak comps for the past few quarters due to unfavorable consumer discretionary spending environment as well as foreign currency translation. The tough retail environment is expected to continue into the third quarter as well. Therefore, TJX will have to face a difficult time beating the estimates in the third quarter of fiscal 2015, in our view.
Stagnant U.S. wages, Ebola scare and falling footfalls in retail stores have made retailers skeptical about maintaining the top-line figures during the recently concluded Thanksgiving day. In fact, retailers across the U.S. have reported lower comps for the months of August and September.
Moreover, recent economic instability in Europe affected TJX Companies’ aggressive expansion in the region. Its stores in the continent are expected to witness a decline in traffic as well.
Earnings Whispers?
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:
Zacks ESP: ESP for TJX is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 83 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.
Stocks to Consider
Some stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Best Buy Inc. (BBY), with an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy).
Ross Stores Inc. (ROST), with an Earnings ESP of +1.15% and a Zacks Rank #2 (Buy).
Foot Locker Inc. (FL), with an Earnings ESP of +1.28% and a Zacks Rank #3 (Hold).
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