On the last day of the month, Target Corp. is expected to deliver its earnings for the fourth-quarter before the opening bell. The company had already warned Wall Street that its results would be lower than initially expected.
After a robust beat-and-raise last quarter that pushed share prices to nearly $78.50, the retailer has implied at a crucial, difficult holiday quarter that caused same-store sales and earnings guidance for 2016 to wane back to more conservative levels. This, in turn, burst Target's brief bubble.
The stock is trading once again below $67, not too far off its recent two-year low of $63.30 last February 6. Target hit a record peak of $85.81 in 2015 and is currently trading $66.80. It hit a steep plunge on January 18 when the company lowered its fourth quarter guidance due to weak holiday sales that missed forecast, as elaborated previously.
While the stock has not recovered from its price dive, it has been steadily improving beginning February 8.
Shares for this American retailer tend to move sharply after reporting financial results; if numbers are strong, the stock can easily gap up. However, if the results disappoint, shares can easily gap down. At this point, however, analysts are seeing Target stock as a risk to buy.
What to expect
For the fourth-quarter in fiscal year 2016, Target is projected to report earnings per share (EPS) of $1.50 on $20.75 billion in revenue, and YoY decline of 4.3%. The YoY overall sales decline would partially stem from the removal of pharmacy and clinic sales from this year's results.
The estimated EPS is close to the mid-point of Target’s management's new guidance range.
The retailer stunned most investors and analysts in the previous third-quarter results when it reported digital sales growth of 26%. For context, e-commerce mammoth and rival Amazon had delivered the same level of growth in its North American retail division in the quarter. In January, Target announced that digital sales had further ramp up its growth pace to 30% in the November-December holiday period, a remarkable number.
For the reporting quarter, analysts are now forecasting e-commerce figures to come in robust again. In January, Target proposed that the accelerated mix shift towards e-commerce will aid in driving costs higher and impact bottom-line results negatively.
Target will not have much to boast for its current quarter, as same-store sales excluding e-commerce declined over 3% during the key holiday period as aforementioned.
Target earnings history
Target has a history of performing better than anticipated when it comes to EPS, while mostly announcing in-line revenue. The company often beats both Wall Street consensus and its own guidance, suggesting that Target's management usually tends to give a conservative guidance while analysts likely leave room for Target to deliver an earnings beat.
The Minneapolis-based retailer has only missed its earnings estimate once in the past two years.
Read more about upcoming earnings release from retailers on FSM News.
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