All three major U.S. stock market indices recovered today after their longest daily losing streak since February. With the current seven-day moving average of COVID-19 cases decreasing 12.7% versus the previous seven-day moving average, and vaccination rates gaining pace, investors have turned slightly optimistic about the pace of economic recovery.
Investors’ interest in growth stocks is evidenced by the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 11.8% gains over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 5.8% gains over the same period. As substantial stimulus payments, a reopening of the economy, and pent-up demand continue to drive discretionary spending, we think consumer stocks should witness a solid rally in the coming months.
In addition, the Federal Reserve’s efforts to keep interest rates anchored near zero should bode well for growth-focused stocks. Amid this environment, we think that if one has $2,500 in disposable cash, one should consider investing in consumer stocks, The TJX Companies, Inc. (TJX), LKQ Corporation (LKQ), and Tempur Sealy International, Inc. (TPX) because they possess sufficient growth attributes to continue advancing.
The TJX Companies, Inc. (TJX)
TJX is an off-price apparel and home fashions retailer in the U.S and worldwide. The Framlington, Mass.-based company provides apparel and accessories for men, women, kids, home improvement, and home furnishing products. TJX operates primarily through T.J. Maxx and Marshalls (combined, Marmaxx) and HomeGoods; TJX Canada; and TJX International.
TJX’s total net sales increased 81.1% year-over-year to $12.08 billion for the second quarter of fiscal 2022, ended July 31, 2021. The company’s net income came in at $785.68 million, versus a $214.22 million net loss in the prior-year quarter. Its EPS amounted to $0.64, compared to an $0.18 loss per share in the second quarter of 2020. The company’s cash and cash equivalents grew 7.3% from their year-ago value to $7.11 billion.
A $48.29 billion consensus revenue estimate for the current year represents a 50.3% increase year-over-year. In addition, the company surpassed the consensus EPS estimates in three of the trailing four quarters. Also, its EPS is expected to grow 848.4% in the current year. TJX’s EPS is expected to grow at a 126.2% rate per annum over the next five years. Moreover, the stock gained 27.3% in price over the past year. Its revenue and total assets have increased at CAGRs of 4.6% and 26.8%, respectively, over the past three years.
TJX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an A grade for Sentiment, and a B for Growth and Quality. We’ve also graded TJX for Stability, Momentum, and Value. Click here to access all of TJX’s ratings. TJX is ranked #16 of 63 stocks in the A-rated Fashion & Luxury industry.
LKQ Corporation (LKQ)
LKQ offers replacement parts, components, and systems used in the repair and maintenance of vehicles. The Chicago-based company operates through three segments: LKQ North America; Specialty; and LKQ Europe. In addition, it provides recreational vehicle appliances, towing hitches, truck bed covers, vehicle protection products, cargo management products, wheels, tires, and suspension products.
In July, LKQ’s board of directors approved a $1 billion increase and a two-year extension in the company’s stock repurchase program, bringing the total authorization under the program to $2 billion and allowing repurchases to continue through October 25, 2024. The decision exhibits the company’s robust financial health.
In May, LKQ acquired the business and assets of Green Bean Battery, LLC. With this acquisition, the company aims to expand its services to meet the increase in demands and opportunities driven by technological changes in the automobile industry.
For the second quarter, ended June 30, 2021, LKQ’s revenue increased 30.8% year-over-year to $3.44 billion. The company’s operating income rose 146.4% from its year-ago value to $444.67 million. Its net income grew 156.8% from the prior-year quarter to $304.62 million. Also, the company’s gross margin increased 40% year-over-year to $1.42 billion.
LKQ’s revenue is expected to increase 11.5% year-over-year to $12.97 billion in its fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to increase 44.3% in the current year. Also, LKQ’s EPS is expected to grow at a 33.5% rate per annum over the next five years. The stock has gained 38.6% in price over the past nine months and 61.9% over the past year. In addition, its EPS and net income have increased at CAGRs of 20.2% and 19.3%, respectively, over the past three years.
LKQ’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has a B for Quality, Sentiment, and Growth.
In addition to the POWR Rating grades we’ve just highlighted, one can see LKQ’s ratings for Value, Stability, and Momentum here. The stock is ranked #8 of 67 stocks in the B-rated Auto Parts industry.
Tempur Sealy International, Inc. (TPX)
Incorporated in 1989, TPX is a Lexington, Ky,-based bedding provider that develops, manufactures, and markets mattresses, adjustable bases, pillows, and other sleep and relaxation products. The company offers its products under the brands: Tempur, Tempur-Pedic, Cocoon by Sealy, Sealy, and Stearns and Foster.
Last month, TPX completed the acquisition of Dreams, a leading specialty bed retailer in the United Kingdom. With this acquisition, TPX’s sales are expected to double, and the company’s annualized global sales are expected to hit more than $1 billion. Furthermore, the company is expected to witness an increase in both in-store and online retail sales.
TPX’s net sales increased 75.8% year-over-year to $1.17 billion for the second quarter, ended June 30, 2021. The company’s gross profit rose 94.9% from its year-ago value to $518.2 million. Its operating income grew 318.2% from the prior-year quarter to $223.3 million. Also, the company’s EPS increased 527.3% year-over-year to $0.69.
Analysts expect TPX’s revenue to increase 36.2% year-over-year to $5.01 billion in its fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to increase 69.1% in the current year. Furthermore, TPX’s EPS is expected to grow at a 31.5% rate per annum over the next five years. Its stock has surged 84.5% over the past nine months and 121.9% over the past year. TPX’s EPS and net income have increased at CAGRs of 47.2% and 57%, respectively, over the past three years.
It’s no surprise that TPX has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has a B grade for Growth, Sentiment, and Quality.
TJX shares were trading at $68.58 per share on Monday afternoon, down $0.29 (-0.42%). Year-to-date, TJX has gained 1.54%, versus a 19.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master’s degree in economics, her interest in financial markets motivated her to begin her career in investment research. More…