Key Takeaways
- Target is set to report Q3 earnings on Thursday before the market opens.
- Zacks Consensus Estimate for Q3 revenues stands at $25.9 billion, a modest 2.2% increase year on year.
- Register now to see our 7 Best Stocks for the Next 30 Days report - free today!
The countdown is on for Target Corporation’s TGT third-quarter fiscal 2024 earnings release, set for Nov. 20 before the market opens. Investors are eager to see if the retail giant can sustain its momentum and deliver another solid quarterly performance amid shifting economic dynamics. This earnings report promises to shed light on Target’s resilience, adaptability and growth potential in today’s challenging retail landscape.
The Zacks Consensus Estimate for third-quarter revenues stands at $25.9 billion, indicating a modest 2.2% increase from the same period last year. Meanwhile, earnings are projected at $2.29 per share, implying promising 9.1% year-over-year growth. The consensus estimate for earnings has been revised upward by a cent in the past seven days, hinting at growing optimism among analysts.
Target’s track record inspires confidence, boasting a trailing four-quarter average earnings surprise of 20.3%. In the last reported quarter, the company’s bottom line beat the Zacks Consensus Estimate by a margin of 19%, raising hopes for another robust performance this time.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Image Source: Zacks Investment Research
What the Zacks Model Predicts About TGT
As investors prepare for TGT’s third-quarter announcement, the question looms regarding earnings beat or miss. Our proven model predicts that an earnings beat is likely for Target this time. 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, which is the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
Target has an Earnings ESP of +1.21% and carries a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
What’s Shaping Target’s Q3 Earnings?
Target has leaned into innovation and partnerships to strengthen its market position. Investments in digital capabilities, store renovations and collaborations with popular brands have enhanced its operational efficiency and appeal. Target’s merchandise strategies, which focus on balancing essential and discretionary categories, are designed to meet shifting consumer preferences while capturing a larger share of the retail market.
We anticipate 1.8% growth in comparable sales for the third quarter of fiscal 2024, fueled by a projected 2.8% increase in the number of transactions. However, this gain may be partially tempered by an expected 1% decline in the average transaction amount.
Target’s curated mix of owned and national brands has solidified its reputation as a one-stop shopping destination. High-demand categories such as home goods, beauty and groceries continue to drive customer interest. The company’s ability to adjust assortment ensures it remains responsive to consumer trends, attracting a diverse customer base.
Given the current economic scenario, Target’s pricing strategy is proving to be a key competitive advantage. Recent price reductions across thousands of items reflect a commitment to providing value for budget-conscious shoppers. Target Circle, the company’s loyalty program, plays an integral role in boosting customer retention and engagement, supporting sales momentum.
Disciplined inventory management and a focus on operational efficiency have improved Target’s financial metrics. For the third quarter, we foresee a gross margin expansion of 90 basis points, with the operating margin expected to improve by 40 basis points.
However, Target’s ongoing investments in labor and technology, while crucial, are contributing to higher costs. For the third quarter, we expect SG&A expenses to increase by 4.4% year over year, resulting in a 50-basis point deleverage as a percentage of total revenues.
Target Stock Price Performance
Target has seen its stock price advancing 8.5% over the past three months compared with the Zacks Retail–Discount Stores industry’s rise of 0.7%. The broader Zacks Retail-Wholesale sector has also risen 9.7%, while the S&P 500 Index has jumped 4.9% during the same period.
Target’s close competitors, Costco Wholesale Corporation COST and Walmart Inc. WMT, have advanced 4.9% and 13.4%, respectively, while Ross Stores, Inc. ROST has declined 4.4% in the same timeframe.
Image Source: Zacks Investment Research
Does Target Present a Strong Case for Value Investing?
From a valuation perspective, Target shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 15.1, below the five-year median of 16.91, and the Retail-Discount Stores industry’s average of 29.6, the stock offers compelling value for investors seeking exposure to the sector. The stock currently has a Value Score of A, further validating its appeal.
Image Source: Zacks Investment Research
Target Stock Analysis: Best Move for Investors Now
Target's growth strategy, alongside its innovative customer engagement initiatives, positions the company for long-term success. Its ability to adapt to evolving consumer preferences, coupled with improved operating margins, strengthens its growth potential. By enhancing the digital shopping experience, investing in stores and expanding same-day services, Target is well-positioned to drive future growth. Existing shareholders may choose to hold their positions, while new investors could find the current valuation appealing for making fresh investments.
Final Thoughts on Target’s Q3 Outcome
Target is set for a decent third-quarter performance, backed by its focus on innovation, strategic partnerships and competitive pricing strategy. The company’s ability to balance essential and discretionary categories, along with its effective loyalty program, continues to attract a broad customer base. Despite rising operational costs, Target’s commitment to improving efficiency reinforces its growth outlook, making it a compelling investment option ahead of earnings.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Target Corporation (TGT) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
