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Target Expected To Be Right On Target With Earnings

Tim Biggam

Target (NYSE: TGT) reports earnings before the open Wednesday, with some of the uncertainty having been removed when the company reduced guidance on August 5, 2014. The new guidance shows an expectation of .78 per share on revenues of 17.39B, down from a previous consensus of $0.91 EPS.

While some of the uncertainty regrading earnings has been reduced owing to the pre-announcement, the first analyst conference call with new CEO Brian Cornell could prove enlightening. Here are some of the analyst ratings and pertinent viewpoints:

Deutsche Bank: Hold, Price Target $57.00
The Deck is Still Not Cleared:TGT's pre-announcement, one week ahead of incoming CEO Brian Cornell's arrival, is a step in the right direction, providing an opportunity for the August 20th conference call to focus on updating strategic initiatives. That said, the deck has yet to be cleared, in our view, with out-year EPS still needing to be reduced further. We have growing concern that TGT's ability to regain comp momentum, while also holding margins steady, may take longer than expected.

Credit Suisse: Neutral, Price Target $55.00
It's All About the Yield Now:Target's dividend yield now appears to be the backstop to the stock price. We estimate TGT will pay $1.3 bn in dividends in '14, representing
more than half of its free cash flow. While it may be difficult for the company to embark on any significant share repurchases in the near future, TGT appears committed to sustaining its dividend per share. We think the yield may be what is supporting the share price going forward

Bank of America: Underperform, Price Target $50.00
See risk of further estimate cuts:TGT's F2Q results have been challenged by margin pressures from a promotional environment and a “cautious consumer” in US stores, softer sales and price investments to clear excess inventory in TGT's CA segment, $111MM in data breach expenses, and losses related to early debt retirement and land impairment.

JP Morgan: Neutral, Price Target $60.00
Pressures unlikely to change in 3Q; a lot riding on 4Q: We believe that promotional pressure in the US is being seen in many consumables and discretionary categories and this is unlikely to change in 3Q.

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