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Shares of both TJX Companies TJX and Kohl's KSS have soared over the last year to blow away the S&P 500 and crush their industry’s average. Now, with the retail portion of Q3 earnings season heating up, let’s see which stock looks like a better buy: TJX or KSS.
Quick Q3 Overview
As of Wednesday, 19 members of the S&P 500’s retail sector had reported their quarterly financial results. Overall, these members saw their earnings jump 37.5% on 10.7% revenue growth (also read: Can Retail Stocks Build on Their Recent Gains?).
Plus, 89.5% of the retailers topped quarterly earnings estimates and 63.2% beat top line projections. Yet, most of those results were from online sellers and restaurants, which includes Amazon AMZN.
Home Depot HD helped kick off earnings season for the more traditional brick-and-mortar companies earlier this week. Since then, Walmart WMT and Macy's M both posted better-than-expected earnings results. Meanwhile, Nordstrom JWN fell short of earnings projections and we are still waiting on Target TGT.
Price Movement
Now that we have a sense of what is going on with some of the biggest retail players, let’s dive into TJX and Kohl's.
KSS stock is up roughly 35% over the last five years. This falls below the S&P’s 54% jump and includes a huge downturn. Meanwhile, TJX stock has surged roughly 68% over this same stretch. As we noted at the top, the two retailers have seen their stock prices soar over the last year.
TJX stock closed regular trading Thursday at $52.47 per share, down roughly 7% from its 52-week high of $56.64 per share. Kohl's, on the other hand, saw its stock price sink 3.40% during regular trading Thursday to hit $73.22 per share. This marked a 12% decline from its year-long high of $83.28 per share.
Valuation
Moving on, KSS stock is currently trading at 13.2X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to its industry’s 24.3X average and the S&P’s 16.2X. Kohl’s stock is also currently trading below its 52-week high of 16X and right at its one-year median.
TJX stock is trading at 19.7X at the moment, which rests below its 52-week high of 21.3X but above its year-long low of 16.2X. Jumping back over the last five years we can see that Kohl's has consistently traded at a discount compared to its counterpart.
Q3 Outlook
Looking ahead, TJX is projected to see its Q3 revenues jump by 8.4% to reach $9.50 billion, based on our current Zacks Consensus Estimate. The firm is also expected to see its adjusted quarterly earnings surge by 22% to hit $0.61 per share.