In MoneyShow's Top Picks 2018 report published at the start of the year, money manager Ingrid Hendershot chose TJX Companies (TJX) as her favorite conservative stock for the year. Now up 25%, the editor of Hendershot Investments updates her outlook.
The TJX Companies reported first quarter revenues rose 12% to $8.7 billion with net income up a dressy 34% to $716 million and EPS up 38% to $1.13. These results reflect a $.17 per share benefit from tax reform.
On an adjusted basis, EPS still rose a strong 17%. Comparable store sales increased 3% during the quarter driven by higher customer traffic in all four major divisions.
Marmaxx, the company's largest division, saw comparable store sales increase 4% during the quarter, marking the 15th consecutive quarter of rising customer traffic.
Free cash flow more than doubled to $460 million during the quarter with the company paying $197 million in dividends and repurchasing $395 million of its shares. The dividend reflects the 25% dividend increase the company announced, which marked the 22nd consecutive year of dividend increases.
Given strong cash flows, management anticipates repurchasing $2.5 to $3.0 billion of TJX stock for the full year. Given the strong first quarter results, management raised their EPS outlook for the full year with EPS expected in the range of $4.75-$4.83, representing an 18%-20% increase over the prior year.
On an adjusted basis for the benefits of tax reform, EPS is expected to increase in the range of 5%-6% based upon estimated comparable store sales growth of 1%-2%. TJX's stock is up 25% since the beginning of the year and still appears attractively valued for long-term investors shopping for a bargain.
