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Target (TGT) Q1 Earnings & Sales Surpass Estimates, Stock Up

Zacks Equity Research

Shares of Target Corporation TGT are up roughly 7% during the pre-market trading hours following impressive first-quarter fiscal 2019 performance and an upbeat view for the second quarter. Robust traffic, favorable store comps and a surge in comparable digital sales are clearly yielding results for this Minneapolis-based company. Both the top and bottom line not only beat the respective Zacks Consensus Estimate but also increased year over year.

Let’s Delve Deeper

This operator of general merchandise stores reported adjusted earnings of $1.53 per share that surpassed the Zacks Consensus Estimate of $1.43 and improved 15.9% from the prior-year period. This year-over-year growth can be attributable to higher sales and share repurchase activity.

Target now projects second-quarter adjusted earnings between $1.52 and $1.72 per share, the mid-point of which $1.62 is higher than $1.47 reported in the year-ago period. For fiscal 2019, management continues to anticipate adjusted earnings in the band of $5.75-$6.05 per share, up from $5.39 reported in fiscal 2018. The consensus estimates for the second quarter and fiscal 2019 are pegged at $1.58 and $5.82, respectively.

This Zacks Rank #2 (Buy) company generated sales of $17,401 million, up 5.1% year over year, while other revenue inched up 0.5% to $226 million. The Zacks Consensus Estimate for the quarter is $17,540 million.

Target Corporation Price, Consensus and EPS Surprise


Target Corporation Price, Consensus and EPS Surprise

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

Target is deploying resources to enhance omni-channel capacities, coming up with new brands, remodeling or refurbishing stores, and expanding same-day delivery options. Target has undertaken rationalization of supply chain with same-day delivery of in-store purchases along with technology and process improvements.

Meanwhile, comparable sales for the quarter increased 4.8% compared with 3% growth witnessed in the year-ago period. The number of transactions rose 4.3%, while the average transaction amount improved 0.5%. Comparable digital channel sales surged 42% and added 2.1 percentage points to comparable sales. Management envisions both the second quarter and fiscal 2019 comparable sales to increase in low-to-mid-single digit range.

Gross margin contracted 20 basis points to 29.6% due to increased digital fulfillment and supply chain costs, partly mitigated by the benefit of merchandising strategies. Operating margin expanded 20 basis points to 6.4%.

Target’s debit card penetration shrunk 40 basis points to 13.1%, while credit card penetration fell 20 basis points to 10.4%. Total REDcard penetration declined to 23.5% from 24.1% in the year-ago quarter.

Other Financial Details

During the quarter, Target repurchased shares worth $277 million and paid dividends of $330 million. The company still had about $1 billion remaining under its $5 billion share buyback program. The company ended the quarter with cash and cash equivalents of $1,173 million, long-term debt and other borrowings of $11,357 million and shareholders’ investment of $11,117 million.

Check These 3 Trending Stocks

Dollar General DG has a long-term earnings growth rate of 12.5% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kimberly-Clark Corporation KMB delivered average positive earnings surprise of 2.1% in the trailing four quarters and carries a Zacks Rank #2.

Walmart WMT delivered an average positive earnings surprise of 7.3% in the trailing four quarters. The company carries a Zacks Rank #2.

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