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Here's How Target (TGT) Looks Placed Ahead of Q3 Earnings

Target Corporation TGT is likely to register an increase in the top line when it reports third-quarter fiscal 2022 results on Nov 16 before market open. The Zacks Consensus Estimate for revenues is pegged at $26.36 billion, indicating growth of 2.7% from the prior-year reported figure.

The bottom line of this general merchandise retailer is anticipated to have declined year over year. Although the Zacks Consensus Estimate for earnings per share for the quarter under review has risen by a couple of cents to $2.14 over the past 30 days, the figure suggests a sharp decline from the earnings of $3.03 from the year-ago period.

We expect revenues to be up 2.5% year over year to $26,300.6 million and the bottom line to decline 31.6% to $2.07 per share.

Target has a trailing four-quarter negative earnings surprise of 13.7%, on average. In the last reported quarter, this Minneapolis, MN-based company’s bottom line missed the Zacks Consensus Estimate by 45.1%.

Key Factors to Note

Target has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers with a seamless shopping experience. It has been ramping up store openings and remodels, scaling up fulfillment services and enhancing supply-chain capabilities. Customers have been opting for Target due to its multi-category assortment of owned and exclusive brands and popular national brands.

Cumulatively, the aforementioned factors are likely to have contributed to the company’s sales performance. We expect comparable sales to increase 2.3% during the quarter under discussion.

Target Corporation Price, Consensus and EPS Surprise

Target Corporation Price, Consensus and EPS Surprise
Target Corporation Price, Consensus and EPS Surprise

Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote

We believe that Target’s recent attempt to rightsize the inventory is in the right direction as the demand is skewed toward consumer staples and away from discretionary categories. However, a slew of actions to tackle the excess inventory, such as additional markdowns, is likely to have weighed on margins. Additionally, the increased compensation and headcount in distribution centers might have hurt the gross margin rate.

Management expects the third-quarter operating margin rate to be lower than the prior-year period. We expect the third-quarter operating margin to shrink 280 basis points.

However, management has been undertaking cost-control measures, such as working with vendors to offset inflationary pressures and driving continued operating efficiencies. Also, Target remains focused on maintaining strength in frequency categories like Food & Beverage, Household Essentials and Beauty.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Target this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target has an Earnings ESP of -2.57% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Five Below FIVE currently has an Earnings ESP of +10.31% and a Zacks Rank #3. The company is likely to register a bottom-line decline when it reports third-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for the quarterly earnings per share of 14 cents suggests a decline of 67.4% from the year-ago quarter.

Five Below's top line is expected to increase marginally year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $611.2 million, which indicates an increase of 0.6% from the figure reported in the prior-year quarter. FIVE has a trailing four-quarter earnings surprise of 11.6%, on average.

Dollar General DG currently has an Earnings ESP of +2.35% and a Zacks Rank of 3. The company is likely to register an increase in the bottom line when it reports third-quarter fiscal 2022 results. The Zacks Consensus Estimate for the quarterly earnings per share of $2.54 suggests an increase of 22.1% from the year-ago quarter.

Dollar General’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $9.43 billion, which suggests a rise of 10.7% from the figure reported in the prior-year quarter. DG delivered an earnings beat of 2.2%, on average, in the trailing four quarters.

Dollar Tree DLTR currently has an Earnings ESP of +6.57% and a Zacks Rank #3. The company is likely to register an increase in the bottom line when it reports third-quarter fiscal 2022 results. The Zacks Consensus Estimate for the quarterly earnings per share of $1.16 suggests an increase of 20.8% from the year-ago quarter.

Dollar Tree’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $6.83 billion, which suggests a rise of 6.5% from the figure reported in the prior-year quarter. DLTR delivered an earnings beat of 8.6%, on average, in the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Target Corporation (TGT) : Free Stock Analysis Report
 
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