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Target profit halves as rising costs hit margins, shares slide 24%
By: Reuters | May 18, 2022
• Target Corp’s first-quarter profit halved and it warned of a bigger margin hit on Wednesday due to rising fuel and freight costs, in a clear sign that deep-pocketed U.S. retailers are no longer immune to surging inflation.
Target Corp’s quarterly profit halved and it warned of a bigger margin hit on Wednesday due to rising fuel and freight costs, in a clear sign there would be no immediate relief for U.S. retailers from surging inflation.
Shares tumbled 24% following the bleak results that came a day after larger rival Walmart Inc cut its annual profit view and its shares logged their worst day since 1987, though both retailers clocked better-than-expected quarterly sales.
“We were less profitable than we expected to be or intend to be over time,” Target Chief Executive Brian Cornell said.
“These (costs) continue to grow almost on a daily basis and there is no sign right now…that it is going to abate over time.”
Rising fuel and freight expenses will add nearly $1 billion more than originally expected in annual expenses, Target said, as pandemic disruptions to shipping channels and the crisis in Ukraine keep costs for companies elevated.
Target’s quarterly gross margin dipped to 25.7% from 30%, also due to excess inventory resulting in higher discounts. Demand for costlier items such as televisions and kitchen appliances was also waning, the company said.
“Target’s print looks remarkably similar to Walmart’s … But this is accompanied by much worse margins due to the now all too common refrain of higher supply-chain costs, which are not yet being fully passed through to consumers,” D.A. Davidson analyst Michael Baker said.
“This dynamic, which is likely to persist, makes it painful to own (shares of) retailers in the current environment.”
The company predicted annual operating margins to be around 6% compared to a prior forecast of 8% or higher. Its first-quarter net profit fell to $1.01 billion. Its adjusted profit of $2.19 per share missed expectations of $3.92.
Still revenue rose 4% to $25.17 billion, helped by its strategy to undercut peers by keeping a large section of its products affordable even at the cost of some short-term profitability.
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Options Traders Blast Target (TGT) Stock Ahead of Earnings
By: Schaeffer's Investment Research | May 17, 2022
• TGT is seeing some headwinds ahead of tomorrow's first-quarter earnings report
• Year-to-date, the equity is down more than 8%
Target Corporation (NYSE:TGT) is up next on the earnings docket, amid a retail-heavy week of quarterly reports. The company is set to posts first-quarter results before the open tomorrow, May 18. Last seen down 2.7% to trade at $213.34, TGT is currently getting dragged lower by Walmart's (WMT) slashed full-year profit forecast. Below, we will dive deeper into the stock's recent chart performance, and unpack how the shares have usually fared post-earnings.
Target stock hit its lowest level since early April earlier today, and is just off its third-straight week of losses. The equity has struggled since the $255 level rejected last month's rally, with the once-supportive 20-day moving average now guiding shares lower. Year-to-date, TGT carries a 8.2% deficit.
The equity has a mixed history of post-earnings reactions, finishing four of eight next-day sessions higher in the past two years, while four were lower. This includes a 12.7% pop in August 2020, and a 6.8% dip in March 2021. This time, options traders are pricing in an 8.9% swing for TGT after earnings, which is higher than the 6% move it averaged following its last eight reports, regardless of direction.
Options traders are already swarming the security. So far, 36,000 calls and 43,000 puts have crossed the tape, which is triple the intraday average. Most popular is the May 200 put, where positions are currently being opened, followed by the weekly 5/27 240-strike put.
It looks as though this penchant for puts has been the norm lately. This is per Target stock's Schaeffer's put/call open interest ratio (SOIR) of 1.16, which ranks higher than 98% of readings from the past year, indicating options players have rarely been more put-biased.
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Target (TGT) Earnings Preview: Resilience Amid Market Rout Shows Post-Pandemic Strength
By: Investing.com | May 17, 2022
• Reports Q1 2022 earnings Wednesday, May 18, before the open
• Revenue Expectation: $24.41B
• EPS Expectation: $3.06
When Target (NYSE:TGT) reports its latest quarterly earnings, the odds are that investors will see the discount retailer maintaining its growth trajectory untouched despite a tough Q1 2022 for the broader US economy.
Target’s share performance reflects this strength. After surging more than 80% during the past two years, the Minneapolis-based retailer proved a safer bet than many mega-cap technology names in the current market rout. TGT closed Monday at $219.25.
TGT Weekly Chart
According to the company’s latest guidance, stronger in-store traffic and growing demand for merchandise categories, including food, apparel, and home goods, will propel a single-digit increase this year, despite cost pressures and supply-chain hurdles.
Target sees revenue growth in the mid-single digits starting next year and beyond, while return on invested capital will be in the high 20% to 30% range.
This outlook signals that the company is in an excellent position to build on the extraordinary sales boom of the last two years while protecting profit margins from the current four-decade-high inflation.
That said, Target still faces macroeconomic headwinds, including labor shortages, supply-chain disruptions, and cost escalations, suppressing the company’s gross margins this year.
During its last earnings report in March, the company told investors it would add $300 million in wage and benefit expenses amid a tight US labor market.
Surging Online Sales
Despite pressure on margins, most analysts remain bullish on Target’s prospects due to its superior online capabilities and its market share gains during the pandemic.
In an Investing.com poll of 31 analysts, 23 rate TGT stock as “Outperform,” with a 12-month consensus price target, implying a 21.6% upside.
TGT Consensus Estimates
Source:Investing.com
Target’s strong performance during the past two years results from Chief Executive Officer Brian Cornell’s efforts to turn around Target’s retail outlets. He spearheaded the remodeling of hundreds of stores, introduced many affordable fashion brands, and bolstered the retailer’s e-commerce offerings.
Furthermore, Target focuses on investing in its stores while also growing digital sales. Amid supply chain disruptions, the company has been using its stores more as mini distribution centers for its booming digital business during the pandemic to fulfill online orders better. Around 19% of Target’s total sales are now digital, up from 8.8% in 2019.
The company is building large sortation centers and warehouses that use automation to quickly pack same-day delivery orders near city centers such as Chicago to expand the business faster, the Wall Street Journal reported citing executives.
In a note yesterday, Deutsche Bank named Target a top pick, advising clients to buy the stock after the recent weakness that it believes is “overdone.” RBC also reiterated Target as its top idea over the next 12 months.
Bottom Line
During Wednesday's report, Target may show some margin suppression due to higher costs, hurting many retailers this year. Nevertheless, in our view, this short-term challenge shouldn’t discourage long-term investors from holding this quality retail stock in their portfolios.
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Here's How Target (TGT) Looks Just Ahead of Q1 Earnings
By: Zacks Equity Research | May 16, 2022
Target Corporation (TGT) is likely to register a marginal increase in the top line when it reports first-quarter fiscal 2022 results on May 18, before market open. The Zacks Consensus Estimate for revenues is pegged at $24,460 million, indicating growth of 1.1% from the prior-year reported figure.
The bottom line of this general merchandise retailer is anticipated to decline year over year. Although the Zacks Consensus Estimate for earnings per share for the quarter under review has increased 1.4% to $3.00 over the past seven days, the figure still suggests a decline of 18.7% from the year-ago period.
Target has a trailing four-quarter earnings surprise of 21.3%, on average. In the last reported quarter, this Minneapolis, MN-based company surpassed the Zacks Consensus Estimate by 11.5%.
Key Factors to Note
Target has been deploying resources to enhance omni-channel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers a seamless shopping experience. Markedly, it has been ramping up store openings and remodels, scaling up fulfillment services and enhancing supply chain capabilities. Customers have been opting for Target owing to its multi-category assortment of owned and exclusive brands as well as popular national brands.
However, Target is likely to have witnessed a modest acceleration in sales as soaring inflation has been pinching consumers’ pockets. Again, the company is up against last year’s record government stimulus that spurred demand above pre-pandemic levels. Also, digital comparable sales might have been soft compared with the year-ago period.
Meanwhile, demand is likely to have been skewed more toward essentials, which carry lower margins. Again, the impact of costs associated with digital fulfillment, supply chain and COVID-related expenses cannot be ruled out. We note that higher merchandise and freight costs hurt the gross margin in the last-reported quarter.
Target Corporation Price, Consensus and EPS Surprise
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Target this time around. 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Target has an Earnings ESP of -0.93% and a Zacks Rank #2.
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7 Undervalued Dividend Stocks to Buy Now
By: InvestorPlace | May 16, 2022
• These dividend darlings can help you earn passive income to ride out the volatility in current markets
Target (TGT)
With a P/E ratio of 15.6, Target (NYSE:TGT) is trading right around its sector average. TGT stock is a dividend king. It’s increased its dividend in each of the last 51 years. And rock-solid fundamentals means the dividend is in no danger. For example, in the last quarter alone, the company generated nearly $2 billion in free cash flow (FCF).
Target remains a cult brand to its loyal customers. This allows the company to avoid getting into the price wars that can bedevil this sector. And the company’s early pivot to the omnichannel model turned out to be a savvy move during the pandemic.
The company is showing strong growth in its digital business that will help the company stay top-of-mind for those everyday items that consumers will still need to purchase.
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Will Target Disappoint Investors on Wednesday?
By: Motley Fool | May 15, 2022
• There's no shortage of potential worries heading into its first-quarter earnings announcement.
Investors have some big concerns heading into Target's (TGT -1.29%) first-quarter 2022 (ended April 30) earnings report on Wednesday. While the retailer is likely to report solid sales trends through early 2022, that growth pace might be slowing due to new pressures like inflation. Target is also facing a difficult comparison with soaring results from a year ago.
Let's take a closer look at how the chain might impress investors in its upcoming announcement on May 18.
Market share growing in several niches
Most investors who follow the stock are looking for Target to post modest sales gains, with revenue rising to about $24.4 billion from $24.2 billion a year ago. That small boost would still be impressive, considering that sales in early 2021 soared thanks to financial stimulus payments and a quickly expanding economy. Those factors aren't repeating in 2022, so investors will be happy to see even slight sales gains on Wednesday.
Watch for CEO Brian Cornell and his team to highlight Target's growing market share in several attractive niches like beauty and skincare, home furnishings, and apparel. Potential letdowns might come in the form of weak e-commerce sales compared to a year ago.
Target might blame supply chain issues and inflation for pressuring growth. It may also be seeing demand shift away from more profitable niches like home furnishings and toward essentials like groceries, which carry lower margins.
Weaker earnings expected
A key factor behind the outperformance of Target's stock through the pandemic has been its industry-thumping profit margin. Shoppers have flocked toward its premium brands and its ultra-fast delivery options, helping push margins well above that of peers like Walmart and Costco.
One big concern today is that this process will reverse itself as shopping trends revert toward normal. Fewer people are relying on home deliveries, after all, and consumers may be looking to save money by switching brands...
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StockNews.com Upgrades Target (TGT) to “Strong-Buy”
By: ABMN | May 14, 2022
• Target (NYSE:TGT – Get Rating) was upgraded by StockNews.com from a “buy” rating to a “strong-buy” rating in a research note issued on Thursday.
Other research analysts also recently issued research reports about the stock. Jefferies Financial Group lowered their price target on shares of Target from $260.00 to $252.00 and set a “hold” rating for the company in a report on Wednesday, March 2nd...
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Earnings Previews: Target Corp. (NYSE: TGT)
By: 24/7 Wall St. | May 16, 2022
• Here is a look at two companies due to report results before markets open on Wednesday.
Target
Target Corp. (NYSE: TGT) stock has added about 9.8% to its share price over the past 12 months. The company recently made several changes to its executive leadership team, but investors will be paying more attention to the company’s same-store sales results. Are consumers still spending, and what does the company expect going forward? Comparisons to last year’s sales will be further compressed by the jump in sales last year following the lifting of pandemic restrictions and federal payments to consumers.
Of 30 analysts covering Target, 22 have a Buy or Strong Buy rating and seven others rate the shares at Hold. At a share price of around $219.75, the upside potential based on a median price target of $275.00 is about 25.1%. At the high price target of $353.00, the upside potential is 60.6%.
The consensus first-quarter 2023 revenue estimate is $24.46 billion, down 21.1% sequentially but up 1.1% year over year. Adjusted EPS are forecast at $3.06, down 4% sequentially and down 17.1% year over year. For the full year, analysts expect Target to report EPS of $14.62, up 7.8%, on sales of $109.8 billion, up 3.6%.
Target stock trades at 15.o times expected 2023 EPS, 13.9 times estimated 2024 earnings of $15.83 and 12.8 times estimated 2025 earnings of $17.12 per share. The stock’s 52-week range is $184.00 to $268.98. The company pays an annual dividend of $3.60 (yield of 1.64%). Total shareholder return for the past year is 6.9%.
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Retail Stocks on Watch for the Week of 12.9.2019
$DG $MONRF $TIF $TGT $UBER
https://www.transparenttradersblackbox.com/post/retail-stocks-on-watch-for-the-week-of-12-9-2019-dg-monrf-tif-tgt-uber
Stocks to Watch for the Trading Day of 11.21.2019
$PYPL $TGT $GOOGL
https://www.transparenttradersblackbox.com/post/stocks-to-watch-for-the-trading-day-of-11-21-2019-pypl-tgt-googl
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