Should You Buy Target (TGT) Stock Ahead of Q2 Earnings?
Shares of Target TGT have climbed over 6% during the last month as investors remain impressed by the retail power’s ability to push further into e-commerce and delivery as it races to keep up with Amazon AMZN. Target’s Q2 financial results are due out before the market opens on Wednesday, so let’s see if investors should consider buying shares of Target right now.
Overview
Fellow retail powerhouse Walmart WMT impressed late last week after the company’s quarterly revenues surged 3.8% and its U.S. comps jumped by 4.5%. Meanwhile, WMT’s earnings climbed over 19% from the year-ago period. More importantly, the firm’s e-commerce sales soared by 40%.
Similar to Walmart, Costco COST, and Kroger KR, Target is in the midst of rolling out a slew of future-looking growth initiatives to compete in the new retail age. The Minneapolis-based company introduced its online ordering and curbside pickup service known as Drive-Up in more than 250 stores during the first quarter. Plus, Target expanded its Restock program nationwide, which allows customers to shop from thousands of popular items for next day delivery.
Furthermore, Target rolled out same-day delivery at over 700 locations in Q1—made possible by its $550 million December 2017 acquisition of grocery delivery startup Shipt.
Stock Price Movement
Target stock has lagged the S&P 500 over the last three years, with its stock price up just around 7%. Narrowing our focus a bit more does help TGT stock look a little better. Shares of Target are up roughly 19% over the last 24 months, which still falls behind the S&P’s 31% climb. But, TGT’s roughly 48% gain over the last year has outpaced the index by approximately 30%.
Valuation
TGT stock is currently trading at 15.4X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to the S&P’s 17.3X and comes in way below its industry’s 27.5X average. Over the last year, shares of Target have traded as high as 16.9X and as low as 12.3X, with a one-year median of 13.8X.
We can see that Target stock has traded at a lower earnings multiple at points over the last year. But if we look back over the last five years, it seems clear that TGT’s valuation picture isn’t that stretched.
Outlook
Target is expected to see its quarterly revenues jump by roughly 5.4% to touch $17.31 billion, based on our current Zacks Consensus Estimate. Looking ahead to the full year, the firm is projected to post revenues of $73.52 billion, which would represent just over 2.3% growth.
At the other end of the income statement, TGT’s adjusted quarterly earnings are projected to pop by 13.8% to reach $1.40 per share, while its fiscal year earnings are expected to jump 12.5%.
Bottom Line
Target’s second-quarter EPS projection has climbed by $0.06 over the duration of the quarter and $0.01 in the last seven days. The retailer has also only seen positive earnings revision actively for Q2, as well as fiscal 2018 and 2019 over the last 30 days.
Target is currently a Zacks Rank #2 (Buy) that sports an “A” grade for Momentum and “Bs” for both Value and Growth in our Style Scores system. Therefore, TGT stock might be worth considering ahead of its quarterly earnings release, which is due out before the opening bell on Wednesday, August 22.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Target Corporation (TGT) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
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