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This story originally appeared on MarketBeat
The retail sector outperformed all expectations in the 3rd quarter and it looks like the same will be true in the 4th quarter. With consumer spending habits rising and the stocks outperforming, we felt it a good time to highlight some of the winners we expect to see win again in 2022.
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Ross Stores Gives Cautious Guidance
Ross Stores (NASDAQ: ROST) had a fabulous 3rd quarter, one of the strongest in the sector, with revenue up 22% from last year. The more notable statistic, however, is that revenue beat the consensus by 500 basis points and was driven by strong comps and company growth. The factor that has shares moving lower, however, is the guidance and we think this is setting up a buying opportunity in the stock. Ross Stores issued updated guidance, guidance that is weaker than previous and below the analyst’s consensus. The company says uncertainty related to supply chain headwinds, headwinds described as worsening, is the reason why.
In our view, this guidance is cautious and perhaps too cautious because there are signs the supply chain issues are improving. Assuming supply chain headwinds keep improving, we would expect to see the company outperform both the guidance and the consensus estimates. As for the analysts, the Marketbeat.com consensus rating is a Buy and the consensus price target has been edging higher. The current Marketbeat.com consensus price target implies more than 26% upside for the stock and we expect to see it move higher over the course of the quarter.
The TJX Companies, No Guidance But Favorable Outlook
The TJX Companies (NYSE: TJX) had an equally strong quarter with revenue up 23.8% and beating the consensus estimate by 230 basis points. The difference is that, while no formal guidance was given, the company offered a favorable outlook for the quarter. The TJX Companies says it is well-positioned for the holiday season and that quarter-to-date comps are running in the mid-teens. Assuming comps accelerate into the peak of the season The TJX Companies could easily sustain another quarter of growth in the 20% range and revenue well above the pre-COVID levels.
The analysts are more bullish on The TJX Companies as well. At least six sell-side analysts have come out with commentary including one upgrade and all six raised their price targets. The new Marketbeat.com consensus is near $84.60 and implies about 20% of upside. The consensus target is up 6.8% in the last month and we think it will continue to edge higher through the end of the year at least.
Kohl’s Raises Guidance
Kohl’s (NYSE: KSS) quarter was less robust but still good with revenue growth topping 15.5%. The differences are that strength surpassed both The TJX Companies and Ross Stores with revenue outperforming the Marketbeat.com consensus by 770 basis points. In addition, margins widened by 400 basis points and the company guided the market higher. The new guidance has revenue margins, and EPS all up from the previous guidance and above the analyst’s consensus as well.
As for the analysts, at least ten sell-siders have mentioned Kohl’s since the release of earnings, and all ten include a price target increase. The new consensus target is near $65.50 and implies about 13% of upside while the high price target adds another 2500 basis points or so of growth to the outlook.