Target Sails By Estimates (TGT, JPM, WMT)

Target Corporation (NYSE:TGT) has reported its Q1 net income of $602 million, down from $651
million in the same quarter in 2007.  It saw a 1.4% drop in earnings per share to $0.74 EPS on store sales of $14.3 Billion; total revenues after credit card receivables of $500 million were listed as $14.802 Billion.  First Call had estimates lowered over the last quarter and estimates for today were $0.71 EPS and $14.92 Billion.

The company’s new stores contributed to make a 5% total sales growth, which offset its -0.6% decline in same store sales.  Target also noted that it repurchased 30.5 million shares at an average of $51.55 per share, which came to roughly $1.6 Billion spent.  Its margin rates fell by 0.7%.

Target also said it did sell an undivided interest in about 47% of its credit card receivables to JPMorgan Chase (NYSE: JPM) for cash proceeds of about $3.6 Billion.  That was completed yesterday and should provide Target with liquidity to implement its capital investments and share buybacks without needing to access term debt markets.

So far shares are un-phased despite no real guidance.  Shares are up almost 0.5% at $55.19 in pre-market trading.  If there are no real major drops to the guidance and no major negative surprises, then that switch out of shares of Wal-Mart Stores Inc. (NYSE: WMT) into Target shares looks like it may be the right trade if you don’t expect the economy to drop off a cliff or if you expect a recovery to begin taking shape in early 2009.

Jon C. Ogg
May 20, 2008

Jon Ogg produces and edits the "10 Stocks Under $10" weekly newsletter and he does not own securities in the companies he covers.