A focus on value for consumers and private-label items could help Target Corporation TGT win market share and boost shares, analysts say ahead of a second-quarter earnings report coming Wednesday before the market opens.
Earnings Estimates: Analysts expect Target to report second-quarter revenue of $25.23 billion according to data from Benzinga Pro.
The company reported revenue of $24.77 billion in last year's first quarter. Target has beaten analyst estimates for revenue in three straight quarters and seven of the last 10 quarters.
Analysts expect Target to report second-quarter earnings per share of $2.20, versus $1.80 reported in last year's second quarter. The company has beaten analyst earnings per share estimates in five of the last six quarters and six of the last 10 quarters.
Guidance from the company calls for second-quarter adjusted EPS to be in a range of $1.95 to $2.35.
What Analysts Are Saying: Target could show a return to year-over-year comparable sales growth in the second quarter, Bank of America analyst Robert Ohmes said in a recent investor note.
The analyst said Target could show gross margin support from cost savings programs, shrinking inventory and moderating shrink.
"We reaffirm our Buy and expect improving near & long-term trends to offset risks including discretionary & competition," Ohmes said.
The analyst has a $190 price target on Target stock with the Buy rating.
"While discretionary categories remain weak overall, we believe TGT's lean inventory levels position it well for the uncertain macro."
Ohmes said Target's focus on value could position the retailer for market share and traffic gains similar to what Walmart WMT saw in the second quarter.
"Walmart F2Q earnings highlighted that value & convenience are resonating with consumers. We believe TGT's heightened focus on value positions it well for share gains going forward."
Telsey analyst Joseph Feldman predicts Target will report second-quarter revenue of $25.3 billion, which is ahead of the Street consensus estimate.
"Broadly, we believe consumers are showing resiliency as they continue to search for value and focus on essentials, while selectively spending on discretionary items and responding to innovation and newness," Feldman said in a recent note.
Feldman has an Outperform rating on Target with a $190 price target.
The analyst said Target's focus on value offerings and its own private brands can help with market share gains.
Here are other recent analyst ratings on Target and their price targets:
- Oppenheimer: Maintained Outperform rating, lowered price target from $200 to $180
- Stifel: Maintained Hold rating, lowered price target from $170 to $147
- Wells Fargo: Maintained Overweight rating, lowered price target from $175 to $160
- JPMorgan: Maintained Neutral rating, lowered price target from $165 to $153
- Truist: Maintained Hold rating, raised price target from $153 to $156
Key Items to Watch: For analysts and investors, market share gains and the focus on value appear to be keys to watch in the earnings report.
Another key will be store traffic and average ticket size.
A report from Placer.ai said Target's second-quarter visits were up 2% year-over-year with gains of 2.5% in May, 8.9% in June and 4.7% in July.
The key will be if the increased foot traffic turned into increased sales.
The Placer.ai report saw Target's Circle Week in July driving a major boost to stores. The week of July 8th saw weekly visits up 6.8% relative to the weekly visit average year-to-date and up 8.7% to last year's Circle Week.
"This demonstrates how the revamped loyalty program and exclusive sales events are successfully driving more customers to Target stores," Placer.ai writes.
Target's earnings report comes around a week after Walmart reported quarterly results that beat estimates and guidance that impressed investors and analysts. Walmart stock is up 41.7% year-to-date in 2024 and up 40.8% over the last year, hitting new 52-week and all-time highs in recent days.
Target stock is up 0.6% year-to-date, as seen on the Benzinga Pro chart below, and up 12.1% over the last year.
Target's stock performance has trailed other retail peers like Walmart and the broader S&P 500 Index, which is up 17.4% year-to-date in 2024 and up 27.0% over the last year.
TGT Price Action: Target shares trade at $143.26 versus a 52-week trading range of $102.93 to $181.86.
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