UBS is calling TJX Companies a growth stock with “surprising upside potential” as the Trump administration imposes tariffs on Mexico, Canada and China. The news UBS named TJX Companies, the Massachusetts-based owner of T.J. Maxx and Marshalls, a “high-conviction buy idea,” citing its strong growth prospects and potential for stealing market share from department store competitors. In a note to clients Wednesday, the analysts said TJX’s newer businesses â including home furnishing chain HomeSense and online activewear retailer Sierra Trading Post â and its international operation as two growth areas to watch. They also like TJX as a stock with limited exposure to Donald Trump’s tariffs on Mexico, Canada and China, since vendors and manufacturers will likely absorb those higher costs before the products get to TJX stores. UBS has a 12-month buy rating on the stock and a price target of $158, an almost 30% upside to its current price of $122 per share. TJX traded 0.3% higher Wednesday. Big picture UBS’s bullish call on TJX comes during a tough period for big-box retailers including Best Buy , Walmart , Target and Home Depot , which recently projected softer earnings growth due to tariff concerns and weaker consumer confidence. That weakness in larger retailers is a “wealth transfer for TJX,” Jim Cramer said Wednesday. Over the past 12 months, TJX shares rose 27%, surpassing the performance of its broader retail cohort, the S & P Retail ETF , which fell 7.8%, as well as the S & P 500 âēs gain of 13.5%. TJX is also outperforming off-price peers like Ross Stores , which reported a fourth-quarter beat Tuesday evening but offered softer-than-expected guidance for its current quarter. “You shouldn’t be presuming, if Ross is doing badly, TJX must be doing badly,” Jim added. TJX also provided cautious guidance when it reported a better-than-expected fourth quarter last Wednesday. Investors, including the Club, weren’t fazed by the forecast since TJX tends to underpromise and overdeliver. Shares actually rose 3% following the report. TJX’s guidance assumed unfavorable foreign exchange rates, which weighs on sales, margins, and earnings. But for the quarter, the company surprised to the upside with 5% comparable sales growth, which was above its prior guidance of 2% to 3% and above the Street’s expectations of 3.1%. UBS highlighted TJX’s aggressive store expansion with plans to reach 7,000 locations, particularly through HomeGoods, HomeSense and smaller store formats. This is important because the home category is a key driver of growth for TJX. In its latest quarter, the HomeGoods division surpassed $1 billion in profit and returned operating margin of 10.9%. The firm also cited international expansion as a catalyst. TJX International, which covers Europe and Australia, accounts for about 12.5% of sales, and its Canadian segment counts for 9%, but it’s a growing piece of TJX’s overall revenue. Last year, the company invested in a joint venture with Mexico’s Grupo Axo and an investment in Dubai-based Brands for Less. Additionally, USB noted that tariffs could work in TJX’s favor, as the retailer’s vast network of 21,000 vendors allows it to source inventory at the best price without absorbing higher costs. TJX will continue to only buy inventory if it gets the right value,” UBS explained and believes vendors and manufacturers will bear the brunt of tariffs-related expenses which will “drive incremental share gain to TJX.” Looking ahead, UBS forecasts TJX’s earnings per share (EPS) to grow at a 11.5% compound annual growth rate over a five-year period and believes continued strong earnings will convince the market of its long-term double-digit EPS growth potential. Bottom line UBS’s assessment on TJX Companies is in line our investment thesis. This is a high-quality defensive stock that’s ideal to own in any economy, but particularly in this uncertain environment. “I would be a buyer of TJX aggressively if I didn’t own it,” Jim said, adding the stock should be at $126 per share. TJX stock was trading at $121 as of Wednesday midday trading. TJX is one of 12 core holdings in the Club’s portfolio, meaning its among a group of stocks that have excellent fundamentals for the year ahead. The company’s ability to capture wallet share from all income brackets, along with its merchandising strategy which brings in a fresh assortment of goods at competitive prices and its stellar inventory management, makes it one of our favorite names. We’ve highlighted that TJX could be a big winner as the tariffs roll out. That’s because retailers who may have loaded up on inventory to get ahead of the charges may be stuck with too much product in a tougher economy â and pass it on to TJX. Following TJX’s strong quarterly performance, we increased our price target to $140 a share and kept our 2 rating , meaning we’d wait for a pullback before buying more. (Jim Cramer’s Charitable Trust is long TJX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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Shoppers come and go the TJ Maxx store at the Mall at Prince George’s on August 17, 2022 in Hyattsville, Maryland.
Chip Somodevilla | Getty Images
UBS is calling TJX Companies a growth stock with “surprising upside potential” as the Trump administration imposes tariffs on Mexico, Canada and China.
