BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ ) firing on all cylinders and hasn’t missed a beat yet. The business grew by expanding the number of stores, membership and services and achieved market-leading results along the way. The bottom line from the fourth quarter results and 2023 guidance is that these trends are unstoppable.
Trading at 19.5 times earnings estimates, the stock is undervalued relative to the broader market, but it is valued relative to its peers. Walmart (NYSE:WMT)it includes Sam’s Club, trades at 22.5 times earnings, and is the best play of its kind. Costco (NYSE: COST ) Trades near 33X. This suggests that BJ’s Wholesale Club could rise through a doubling of earnings and multiple expansions, and that combination could propel the stock to an all-time high.
BJ hits a record high with a record quarter
BJ’s had a strong quarter and year, with revenue and earnings hitting record highs that exceeded analysts’ consensus estimates. Fourth-quarter revenue of $4.93 billion was up 13.1% from a year ago and beat consensus by 300 basis points, a significant margin. Earnings were driven by 9.8% growth in components and 8.7% in non-fuel, boosted by new store additions and acquisitions of new grocery businesses earlier this year.
Membership fees, a leading indicator of future growth, increased by 8% and a record renewal rate of 90%, proving that plans to improve customer satisfaction are working. Digital, another pillar of the growth strategy, grew by 22%.
Margins are also good news. The company increased gross margin by 30 basis points and controlled expenses to deliver strong net income. Breaking down the numbers, operating income rose 22.7%, EBITDA rose 18.7%, adjusted GAAP EPS rose 21%, and adjusted EPS rose 25% to beat the Marketbeat consensus estimate. com 1200 basis points.
Forecasts predict an equally impressive 4-5% growth in non-fuel offset stores and new store additions. Merchandise gross margins are expected to increase an additional 40 basis points and offset higher labor and other costs. Earnings are expected to be flat year-over-year, the only bad news, though offset by analysts’ lower expectations.
BJ’s Wholesale Club returns capital to shareholders
BJ’s Wholesale Club does not pay a dividend, which slows down the price trend, but it does buy back shares. The company bought 626,000 shares in the fourth quarter and a decrease of about 0.95% year over year. That’s $152 million for shareholders, and buybacks can be expected to continue. The company has also repaid and refinanced some of its debt, so the balance sheet is improving along with earnings strength.
Analysts and institutions are buying these stocks and should continue to support the price action. Analysts pegged the stock at moderate-long, though the price target was lowered. Marketbeat.com’s analyst trackers haven’t picked up any new action since the earnings report, but expect the results to help the price target, if not the sentiment.
Technical Forecast: BJ’s Wholesale Club is in an uptrend
BJ’s Wholesale Club is in a confirmed bullish trend after its Q4 release. Pre-market action sent shares up more than 4% and well above the trend line. If the market follows this signal, the next resistance will be the all-time high near $80. If this breaks and the market is able to hold a new high, another sustained uptrend is likely. Short-term targets are around $95.
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