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Target (TGT) Down 10.6% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Target (TGT - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Target due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Target Q1 Earnings Beat Estimates, Comps Flat Y/Y
Target Corporation came up with first-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate, while the bottom line beat the same. Total revenues improved year over year, but earnings declined from the year-ago period. Comparable sales were flat to last year. Target witnessed stellar demand in frequency categories but a pullback in discretionary categories.
Following the results, management provided a muted view for the second quarter. However, it maintained the full-year forecast based on the expected benefit from efficiency and cost-containment efforts. Target also cautioned that inventory shrink, mainly due to theft and organized retail crime, is likely to hurt this year’s profitability by more than $500 million.
Sales & Earnings Picture
Target reported adjusted earnings of $2.05 per share, which surpassed the Zacks Consensus Estimate of $1.74. However, the bottom line declined from the earnings of $2.19 reported in the year-ago period.
The big-box retailer generated total revenues of $25,322 million, which increased 0.6% year over year. However, the metric fell short of the Zacks Consensus Estimate of $25,338.2 million. We note that sales jumped 0.5% to $24,948 million, while other revenues rose 10.2% to $374 million.
Meanwhile, comparable sales for the quarter were flat to last year. The metric reflected comparable store sales growth of 0.7% and a comparable digital sales decline of 3.4%. Traffic jumped 0.9% during the quarter. Strength in Food & Beverage, Beauty and Household Essentials offset the ongoing softness in discretionary categories.
Margins
The gross margin increased 60 basis points to 26.3%, reflecting the benefits of lower freight costs, retail price increases, lower clearance markdown rates and lower digital fulfillment costs. These were partly offset by higher inventory shrink. Meanwhile, the operating margin shriveled to 5.2% from 5.3% in the year-ago period.
Other Financial Details
Target ended the quarter with cash and cash equivalents of $1,321 million, long-term debt and other borrowings of $16,010 million and shareholders’ investment of $11,605 million. During the quarter, Target paid out dividends of $497 million.
Target did not buy back any shares during the quarter under review. At the end of the quarter, the company had about $9.7 billion remaining under the repurchase program approved in August 2021.
Outlook
Based on soft first-quarter sales trends, Target envisions second-quarter fiscal 2023 comparable sales to decline in the low single digits. For the quarter, the company expects both GAAP and adjusted earnings in the band of $1.30-$1.70 per share.
For fiscal 2023, management continued to expect comparable sales in a wide range, from a low-single-digit decline to a low-single-digit increase. Target expects the operating income to grow more than $1 billion. It expects both GAAP and adjusted earnings between $7.75 and $8.75 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -17.31% due to these changes.
VGM Scores
Currently, Target has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Target has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Target (TGT) Down 10.6% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Target (TGT - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Target due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Target Q1 Earnings Beat Estimates, Comps Flat Y/Y
Target Corporation came up with first-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate, while the bottom line beat the same. Total revenues improved year over year, but earnings declined from the year-ago period. Comparable sales were flat to last year. Target witnessed stellar demand in frequency categories but a pullback in discretionary categories.
Following the results, management provided a muted view for the second quarter. However, it maintained the full-year forecast based on the expected benefit from efficiency and cost-containment efforts. Target also cautioned that inventory shrink, mainly due to theft and organized retail crime, is likely to hurt this year’s profitability by more than $500 million.
Sales & Earnings Picture
Target reported adjusted earnings of $2.05 per share, which surpassed the Zacks Consensus Estimate of $1.74. However, the bottom line declined from the earnings of $2.19 reported in the year-ago period.
The big-box retailer generated total revenues of $25,322 million, which increased 0.6% year over year. However, the metric fell short of the Zacks Consensus Estimate of $25,338.2 million. We note that sales jumped 0.5% to $24,948 million, while other revenues rose 10.2% to $374 million.
Meanwhile, comparable sales for the quarter were flat to last year. The metric reflected comparable store sales growth of 0.7% and a comparable digital sales decline of 3.4%. Traffic jumped 0.9% during the quarter. Strength in Food & Beverage, Beauty and Household Essentials offset the ongoing softness in discretionary categories.
Margins
The gross margin increased 60 basis points to 26.3%, reflecting the benefits of lower freight costs, retail price increases, lower clearance markdown rates and lower digital fulfillment costs. These were partly offset by higher inventory shrink. Meanwhile, the operating margin shriveled to 5.2% from 5.3% in the year-ago period.
Other Financial Details
Target ended the quarter with cash and cash equivalents of $1,321 million, long-term debt and other borrowings of $16,010 million and shareholders’ investment of $11,605 million. During the quarter, Target paid out dividends of $497 million.
Target did not buy back any shares during the quarter under review. At the end of the quarter, the company had about $9.7 billion remaining under the repurchase program approved in August 2021.
Outlook
Based on soft first-quarter sales trends, Target envisions second-quarter fiscal 2023 comparable sales to decline in the low single digits. For the quarter, the company expects both GAAP and adjusted earnings in the band of $1.30-$1.70 per share.
For fiscal 2023, management continued to expect comparable sales in a wide range, from a low-single-digit decline to a low-single-digit increase. Target expects the operating income to grow more than $1 billion. It expects both GAAP and adjusted earnings between $7.75 and $8.75 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -17.31% due to these changes.
VGM Scores
Currently, Target has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Target has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.