On Oct 18, we downgraded our long-term recommendation on
) to Underperform based on the company's disappointing
second-quarter fiscal 2013 performance coupled with the tough
economic scenario and a cautious consumer spending environment.
The stock currently carries a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Estimates for Target have shown a downtrend since the company
reported dismal second-quarter results on Aug 21, 2013. The
quarterly earnings including U.S. and Canadian operations came in
at 95 cents a share that dipped 10.4% from $1.06 reported in the
prior-year quarter. Total revenue increased 2% to $17,117 million
but fell short of the Zacks Consensus Estimate of $17,357
Management now anticipates fiscal-2013 earnings to come in at
the lower end of the earlier provided guidance range of $4.70 to
$4.90 per share due to household budgetary constraints. The
macroeconomic condition is still not stable and consumers will
tread cautiously with regard to the purchase of discretionary
We expect footfall to be challenging given the near-term
headwinds such as higher payroll taxes, sluggish economic
recovery and e-Commerce competition. Consequently, management now
projects comparable-store sales growth for the full year to be
1%, down from a range of 2% to 2.5% forecasted earlier.
Consequently, we are witnessing a fall in the Zacks Consensus
Estimate, as analysts become less constructive on the stock's
future performance. The Zacks Consensus Estimate for fiscal 2013
fell by 10% to $3.88 and for fiscal 2014 it tumbled by 7.9% to
$5.00 per share, over the past 60 days.
Other Stocks that Warrant a Look
Other stocks worth considering in the retail sector include
Ross Stores Inc.
Dollar General Corp.
The TJX Companies, Inc.
) all sporting a Zacks Rank #2 (Buy).
DOLLAR GENERAL (DG): Free Stock Analysis
ROSS STORES (ROST): Free Stock Analysis
TARGET CORP (TGT): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis
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