), the operator of general merchandise and food discount stores in
the United States and an S&P 500 company, is slated to report
its second-quarter 2012 financial results before the opening bell
on Wednesday, August 15.
The current Zacks Consensus Estimate for the quarter is pegged
at $1.01 per share, portraying a decline of 1.9% from the
prior-year quarter's earnings. The estimates in the current Zacks
Consensus range between a low of 98 cents and a high of $1.04 per
share. The Zacks Consensus estimates revenue to be at $16,771
million for the quarter.
Recap of First-Quarter 2012
Target posted better-than-expected first-quarter 2012 results on
the back of healthy sales. The quarter benefited from an early
Easter and favorable weather conditions. The company delivered
quarterly earnings of $1.11 per share that topped the Zacks
Consensus Estimate of $1.01 and rose 11.5% from 99 cents earned in
the prior-year quarter.
Total revenue climbed 5.9% to $16,867 million from the
prior-year quarter, but fell short of the Zacks Consensus Estimate
of $16,871 million. Retail sales grew 6.1% to $16,537 million as
shoppers are gradually opening up their wallets but still remain
Minneapolis, Minnesota-based Target announced that
comparable-store sales for the quarter rose 5.3% compared with a 2%
increase registered in the prior-year quarter, and reflects the
company's most robust comparable-stores sales performance in a
quarter in over six years. The number of transactions rose 2%,
whereas the average transaction amount climbed 3.2% in the
Target, in its last earnings call, projected earnings between
$1.04 and $1.14 per share for the second quarter and in the range
of $4.60 to $4.80 for fiscal 2012.
Zacks Agreement & Magnitude
We noticed that 3 out of 20 analysts covering the stock raised
their estimates for the second quarter of 2012, whereas 2 analysts
lowered the same in the last 30 days, which had no impact on the
Zacks Consensus Estimate. Also in the last 7 days, no movement was
noticed in the Zacks Consensus Estimate, as none of the analysts
revisited their estimates.
The upward revision in the estimates was driven by healthy July
comparable-store sales growth of 3.1%. Moreover, comparable-stores
sales for the second quarter of 2012 increased 3.1%, in line with
management's expectation. However, what kept analysts wary was the
performance of comparable-store sales for July compared with the
prior-year period, when comps rose 4.1%.
Positive Earnings Surprise History
With respect to earnings surprises, Target has topped the Zacks
Consensus Estimate over the last four quarters in the range of 3%
to 10.8%. The average remained at 6.8%, suggesting that Target has
outpaced the Zacks Consensus Estimate by that magnitude in the
trailing four quarters. Given the past performance, we expect the
company to outperform the Zacks Consensus Estimate in the upcoming
Target is persistently striving to keep itself afloat in an
economy which is still not completely recovered. The company's
P-fresh remodel program, 5% REDcard Rewards program, City Target
stores, The Shops at Target initiatives and its foray into the
foreign market are measures the company has taken in this
Target's efficient marketing, multi-channel strategy, product
innovation, compelling pricing strategy, and new merchandise
assortments, should drive comparable-store sales and operating
margins in the long term. We expect the company to gain market
share, and believe that increased focus on consumable items should
boost sales and earnings in a sluggish consumer environment. The
company's long-term objective is to attain $100 billion or more in
sales and $8.00 or more in earnings per share by 2017.
The economy has not yet recovered fully. It is evident that the
company's customers remain sensitive to macroeconomic factors
including interest rate hikes, increase in fuel and energy costs,
credit availability, unemployment levels and high household debt
levels which may affect their discretionary spending, and in turn
curtail the company's growth and profitability.
Moreover, a greater concentration of the company's
revenue-generating capabilities in limited regions of the United
States poses a competitive threat to Target, compared with
Wal-Mart Stores Inc.
Costco Wholesale Corporation
), which are more geographically diverse.
Currently, we maintain our long-term Neutral recommendation on
the stock. However, Target retains a Zacks #2 Rank that translates
into a short-term Buy rating.
COSTCO WHOLE CP (COST): Free Stock Analysis
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
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