Retail

Are Analysts Really That Impressed by Target After Earnings?

Chris Lange

Published: August 22, 2019 11:05 am

Last Updated: January 30, 2020 5:06 pm

Target Corp. (NYSE: TGT) released its most recent quarterly results before the markets opened on Wednesday. Although investors were fairly positive on earnings, analysts seemed to be more on the fence, though they did recognize the beat and hike their targets in response.

24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying after the fact.

The big-box retailer said that it had $1.82 in earnings per share (EPS) and $18.42 billion in revenue, which compared with consensus estimates of $1.62 in EPS and revenue of $18.34 billion. In the same period of last year, Target said it had EPS of $1.47 on $17.78 billion in revenue.

Same-store sales increased by 3.4% compared with the second quarter of 2018. Digital channel sales rose 34% and contributed 1.8 points to same-store sales growth. Store traffic rose 2.4% in the quarter. Operating income rose by 16.9% from $1.13 billion last year to $1.32 billion.

Target also reported that its digital channel accounted for 7.3% of total sales, up from 5.6% in the second quarter of last year. For the first half of 2019, digital sales generated 5.4% of all sales, flat compared to the first six months of 2018.

Higher digital fulfillment and supply chain costs crimped Target’s margin rate in the quarter, even though the rate rose from 30.3% last year to 30.6%. The company’s decision to compete with Amazon and Walmart on fast delivery has paid off.

In its outlook for the third quarter and the second half of 2019, Target said it expects same-store sales growth of around 3.4% in both periods, matching growth for the first half of the year. For the third quarter, the company expects adjusted EPS of $1.04 to $1.24. For all of 2019, Target raised its GAAP and adjusted EPS forecasts from a range of $5.75 to $6.05 to a new range of $5.90 to $6.20.

Here’s what analysts had to say after the report:

• UBS reiterated a Neutral rating and raised its target to $103 from $86.
• Merrill Lynch has raised its price target to $125 from $105.
• Morgan Stanley reiterated it as Equal Weight and raised its target to $107 from $76.
• Buckingham Research raised its target price from $102 to $117.
• Citigroup upgraded it to Buy from Neutral and raised its price target from $80 to $130.
• KeyBanc reiterated its Overweight rating and raised its target to $120 from $110.

Shares of Target traded up about 1% on Thursday to $104.03, in a 52-week range of $60.15 to $105.43. The consensus price target is $102.19.