uploads/2018/11/TJX-EPS-1.png

What Might Drive TJX Companies’ Third-Quarter Earnings?

By

Updated

Performance so far

TJX Companies (TJX) surpassed analysts’ earnings expectations in the second quarter of fiscal 2019, which ended on August 4, after missing expectations in the first quarter. The company’s second-quarter adjusted EPS grew over 37% to $1.17, exceeding analysts’ expectation of $1.05. Excluding the impact of a $0.18 benefit from the new tax act, the company’s EPS came in at $0.99.

Article continues below advertisement

Factors that influenced Q2 earnings

TJX Companies’ second-quarter EPS growth was driven by strong sales growth and the impact of lower taxes. Foreign currency movements had a 3% favorable impact on the second-quarter EPS growth. However, restructuring costs associated with TJX Companies’ global IT function negatively impacted EPS growth by 3%. Third-quarter EPS also gained from a lower share count resulting from share repurchases.

Earnings outlook

Excluding the impact of the benefit from the new tax act, TJX Companies expects its adjusted EPS in the range of $1.00 to $1.02 in the third quarter of fiscal 2019, which ended on November 3. Foreign currency headwinds and higher wages are expected to have a negative impact of 4% and 2%, respectively, on the third-quarter EPS growth. TJX Companies announced a two-for-one stock split in September. Adjusting for the stock split, the company’s fiscal 2019 third-quarter adjusted EPS guidance would be $0.50 to $0.51.

Adjusted for the stock split, the company’s fiscal 2019 adjusted EPS guidance range is $2.05 to $2.07. Including the tax benefit, TJX Companies expects its fiscal 2019 EPS in the $2.42 to $2.44 range.

Including the tax benefit, analysts expect TJX Companies’ third-quarter adjusted EPS to grow 22% on a year-over-year basis to $0.61. Analysts expect the company’s fiscal 2019 adjusted EPS to increase by 24.7% to $2.47.

Part five of this series will discuss TJX Companies’ valuation and analysts’ recommendations.

Advertisement

More From Market Realist