Retail Discounter TJX Is Thriving as Inflation Pressures Consumers

Text size

These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.

The

TJX

Cos. TJX-NYSE

Outperform • Price $79.02 on Nov. 16

by

Cowen


The stock has hit all-time highs. However, the consensus could be underestimating the [remaining] markup and merchandising margin opportunity, along with the possibility of lower freight costs in fiscal-year 2024. We are in line with management’s guidance for the fourth quarter, but our fiscal-2024 estimates assume earnings per share of $3.63, above the consensus $3.50. The setup into the fourth quarter reflects some caution, but TJX sees a “tremendous buying environment.” Momentum at the Marmaxx unit, along with TJX’s off-price business model of [selling] on-trend branded goods at a discount to traditional retailers, suggest an attractive channel for cash-strapped shoppers in the holiday quarter. Price target: $84, up from a prior $78.

Wendy’s

WEN-Nasdaq

Outperform • Price $20.72 on Nov. 16

by Wedbush

We view Wendy’s current valuation as an overly pessimistic assessment of management’s ability to navigate toward mid- to high-single digit annual growth in Ebitda [earnings before interest, taxes, depreciation, and amortization]. We came away from a virtual HQ meeting with CEO Todd Penegor and Chief Financial Officer Gunther Plosch on Nov. 16 more confident that drivers of sustained top-line momentum, margin expansion, and unit growth exist beyond the near term. Our $24 stock-price target is based on a 13.6 times enterprise value/Ebitda multiple for 2023. Wendy’s remains on the Wedbush Best Ideas List.

ING Groep ING-NYSE

Buy • Price $10.43 on Nov. 4

by BofA Global Research

We remain constructive on ING, foreseeing a more-than 12% return on tangible equity in 2025, amid better revenue and cost controls, and good asset quality. Capital return is a key driver. We have increased our 2023-25 net profit [estimate] by 12%, mainly to factor in higher net interest income, driven by the [Dutch banking company’s] sensitivity to European Central Bank [interest rates], partly offset by higher costs. The stock’s valuation is attractive at 0.77 times price/tangible book value. ING has announced an extra 1.5 billion euro share buyback for 2022. Any amount remaining after Dec. 31 will be paid in cash on Jan. 16, 2023. We believe that ING’s reduced exposure to Russia at €3.8 billion is largely covered. Stock-price objective: $14.50.

Whirlpool

WHR-NYSE

Market Perform • Price $148.28 on Nov. 16

by Raymond James

Year-over-year major appliance production fell again in October. Unit shipments per day and wholesale pricing appear to have slipped sequentially, versus the levels in September. The only bright spot was a sequential improvement in two-year stacked pricing. The industry generated daily shipments within the 200,000-220,000 range every month from June 2020 to December 2021. Daily shipments have been more volatile in 2022, with only March, June, and September within this “full capacity” range. Interestingly, the first month of the first, second, and third quarters posted the lowest daily shipment rates. Our fourth-quarter adjusted EPS estimate for Whirlpool of $3.13 assumes North American sales dollars down 4%, year over year.

BXP BXP-NYSE

Neutral • Price $71.99 on Nov. 7

by Piper Sandler

BXP’s recent $750 million debt issuance at 6.75% strikes the reality of today’s rates, which are poised to go higher, and shows the financial decisions that real estate investment trusts face following two decades of “lower for longer.” BXP’s last issuance, in September 2021, priced at 2.45%, and its average debt cost is 3.4%

We were surprised at 6.75% for five years, but BXP noted that, [while a 10-year issue] would have been only 30 basis points [100ths of a percentage point] more, the shorter term plays to management’s hopes that rates will be lower in 2027. With rates decidedly up, the return hurdles [for REITs] have commensurately increased.

Coupled with management’s expectation for a leasing slowdown, 2023 looks to be a tougher year. We are lowering our funds from operations estimates by one cent a share, to $7.52, for 2022; by eight cents, to $7.11, for 2023; and by 13 cents, to $7.21 for 2024. We have lowered our stock-price target to $74 from $75.

BCE

BCE-NYSE

Four Stars Out of Five • Price $46.87 on Nov. 10

by

Morningstar


[BCE, a telecommunications and media company, provides wireless, wireline, Internet, and TV services to residential, business, and wholesale customers in Canada.] The magnitude of its subscriber additions in both wireless and fixed-line broadband was the highlight of its third-quarter results. But the media business is seeing weakness due to the broader economic environment. Also, consolidated margins were relatively weak, and strength with retail broadband subscribers is barely enough to offset weakness in wireline voice and enterprise services. We think the stock is attractive, but not overly compelling. Fair-value estimate: US$49.

To be considered for this section, material should be sent to [email protected].