BJ stock is the IBD Stock Of The Day as the deep-discount retail giant rises toward a buy point after a powerful rebound from a key technical level.
BJ's Wholesale Club runs more than 200 stores in the U.S., selling everything from groceries and electronics to furniture and jewelry. It's a membership-only club like Costco Wholesale. Both BJ's and Costco also sell gas and diesel.
BJ's Wow Deals enticed shoppers looking for deals during the ongoing rapid price inflation affecting groceries and other items. Its "value is king " business model has paid off for investors as well.
In addition, strong fuel margins have benefited gas-station operators like Murphy USA, which belongs to the IBD 50 list of top growth stocks.
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BJ's Wholesale: Defensive Play
Wholesale and discount retail stocks can provide investors a defensive edge during uncertain markets, like the current one. Year to date, BJ's Wholesale has gained 17% vs. a 19% decline for the S&P 500.
The IBD Stock Checkup tool shows that BJ stock is highly rated by IBD in terms of key ratings. It earns a 96 IBD Composite Rating, 94 RS Rating and a 97 EPS Rating, all out of a best-possible 99.
Wall Street also likes this discount retail stock, with a consensus rating of overweight from 21 analysts.
BJ Stock, Discount Retail Stocks
Shares of BJ's Wholesale Club rose 0.6% to 77.83 amid a broad decline on the stock market today.
BJ stock has advanced for three weeks, toward a 79.79 buy point in a shallow cup base. Shares recovered above support at the stock's 50-day/10-week moving average in late October. The cup base, which goes back to Sept. 12, is just 13% deep and just above a prior, looser double-bottom base. This base-on-base pattern suggests strength in the current volatile market.
BJ stock could also form a handle, offering an early entry.
The relative strength line for BJ stock is rising. The RS line is making a new high on the weekly MarketSmith chart, marked by a blue dot at the end of that line. A rising RS line shows outperformance vs. the S&P 500.
The discount and variety retail industry group ranks No. 70 out of 197 groups tracked by IBD. BJ stock is No. 1 in this group in terms of Composite Rating, EPS Rating and RS Rating.
A 94 Relative Strength Rating means that BJ stock has outperformed 94% of all stocks in IBD's database over the past year. Its RS Rating compares with an 89 each for Dollar Tree and Dollar General, a 72 for Ollie's Bargain and a 64 for Five Below.
Costco, which belongs to a different retail industry group, bears an RS Rating of 68.
BJ's Wholesale Earnings: 'Value Is King'
On Aug. 18, BJ's Wholesale Club topped earnings views for the July quarter. BJ's earnings grew 29%, the third straight quarter of accelerating EPS growth. Revenue rose 24%, the second quarter in a row of faster sales gains.
Same-store sales advanced 20% year over year. Membership fee income increased by 11%. The company raised outlook and said it remains on track to open 11 new clubs in fiscal 2022.
"Our business model is designed to work well in the current consumer environment where value is king," CEO Bob Eddy said in the Aug. 18 BJ's earnings release. The Marlborough, Mass.-based company is due to report for Q3 on Nov. 17, before the market open.
Over the past three quarters, BJ's earnings growth ranged from 14% to 29%. Analysts polled by FactSet are now forecasting 10.6% EPS growth for the full year on a 14.5% revenue gain.
This top retail stock generates 71% of revenue from the groceries business. The gasoline segment accounts for 15% and the general merchandise segment for 14%, FactSet shows. BJ's is due to report its third-quarter results on Nov. 17.
