Target Q3 Earnings on Deck: Will Report Send TGT Stock to New Highs?
Target TGT is set to report its third quarter performance before the opening bell on Wednesday, November 20. The retailer has seen its shares rise over 69% in 2019 and is currently trading around 2% below its 52-week high of $114.83.
Target has focused on expanding its digital presence, which will make its e-commerce figures imperative in the upcoming report. Wall Street will also look to Target’s guidance for the vital holiday shopping period.
Digital Sales Drive Growth
Target posted an impressive Q2 performance, with comparable digital sales up 34% to account for 7.3% of total sales. Nearly one-third of these sales came from same-day services, in-store pickup, Drive-Up, and Shipt. The uptick in these digital options shows how Target is using digital commerce to improve the profitability of physical stores.
CEO Brian Cornell was pleased with the performance and stated "These are remarkable statistics, and they demonstrate how rapidly our guests are learning about and embracing these new convenient options." Wall Street and investors will be looking for these digital channels to continue their remarkable growth and for consumers to continue to adopt these new ways of shopping.
Target also reports after its main competitor, Walmart WMT, posted its Q3 results that highlighted strong operating metrics in its core US segment. This could put pressure on TGT as investors expect a strong report to assure them that Target isn’t giving up any ground to Walmart.
Target’s same-day services are expected to continue to bolster the company’s bottom-line but some are worried about the sustainability of the model. Some investors feel that the services will only be sustainable while the number of orders being fulfilled is still relatively small. Wall Street will look for updates on the success of the supply chain fulfillment and how management plans to handle the growth.
In preparation for the busiest shopping season of the year, Target is spending $50 million more on payroll during the fourth quarter than it did a year ago. The retailer is also offering enticing shipping deals from Nov. 1 through Nov. 21, which includes free shipping on thousands of items with no minimum purchase. And Target’s partnership with Disney DIS should help the retailer boost its toy sales during the holidays.
Our Q3 consensus estimates forecast a bottom-line hike of 8.26% to $1.18 per share and a top-line gain of 3.63% to $18.47 billion. Comparable store sales in the third quarter are projected to come in at 3.67% and the retailer is estimated to add nine more stores from its Q2 2019 figure. Looking ahead to fiscal 2019’s figures, our estimates anticipate earnings to climb 14.47% to $6.17 per share and for net sales to reach $78.33 billion for a 3.95% rally.
Target has seen its earnings estimates revised higher, which helps TGT earn a Zacks Rank #2 (Buy). Target is also currently trading just below its all-time high and it hopes that an impressive Q3 report can send it soaring to new levels. However, to reach new record levels, Target will need to show investors that its digital commerce channels can continue to grow.
Wall Street might also expect Target to provide strong guidance for the fourth quarter. This would help assure investors that the holiday season is set to be bountiful for Target.
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