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Michael Fowlkes' Analyst Insights

InvestorsObserver
Options and ETF Analyst Writer
Michael Fowlkes
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TJX Companies to report its quarterly numbers

Michael Fowlkes

5/19/2018 11:54 AM

What's Happening

Off-price retailer TJX Companies is scheduled to report its first-quarter numbers May 22. The company will release its quarterly report before the market open, with the consensus calling for earnings of $1.02 per share. During the same period last year the company earned $0.82 per share, and the stock has appreciated 10.8% on the year.

Technical Analysis

TJX was recently trading at $84.99, down $2.32 from its 12-month high and $18.55 above its 12-month low. Overall technical indicators for TJX are bullish with a strong upward trend. The stock has recent support above $82.00 and recent resistance below $86.50. Of the 18 analysts who cover the stock, 14 rate it a “strong buy”, one rates it a “buy”, and three rate it a “hold”. TJX gets a score of 72 from InvestorsObserver’s Stock Score Report.

Analyst's Thoughts

A strong overall economy with low unemployment is perfect for retailers, but what we have been seeing in recent months is that off-priced retailers such as TJX and Burlington Stores (BURL) have been among the strongest brick-and-mortar retailers. Consumers still remember the lessons learned in the financial crisis of a few years back and continue to shop where they feel they can find the best deals for their money. As such, TJX has managed to grow earnings by 8.0% per annum over the last five years and is expected to continue growing earnings by an average of 10.0% a year for the next five years. The company posted mixed results last quarter, but a strong sales reading drove shares higher and the stock is currently sitting just shy of its all-time high. The street expects a small earnings beat for the most recent quarter, with a whisper number of $1.04, so watch for that number, which will really drive shares higher. Analyst have an average price target of $92.00 on the stock.

Stock Only Trade

If you're looking to establish a long stock position in TJX, consider buying the stock under $85.00. Sell if it falls below $76.50 or take profits if it gets to $98.00.

Bullish Trade

If you want a bullish hedged trade on the stock, consider a July 72.50/77.50 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (50.4% annualized*) and the stock would have to fall 8.3% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider a July 92.50/95 bear-call credit spread for a $0.25 credit. That's a potential 11.1% return (64.4% annualized*) and the stock would have to rise 9.1% to cause a problem.

Covered Call Trade

If you like the stock but wish to lower your cost basis on a new position, you may want to consider an October $85 covered call. Buy TJX shares (typically 100 shares, scale as appropriate), while selling the October $85 call for a debit of $80.20 per share. The trade has a target assigned return of 5.9%, and a target annualized return of 14.0% (for comparison purposes only).

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