Target Corporation (TGT), recently posted better-than-expected second-quarter 2011 results.
Street analysts had a week to ponder on the news. In the subsequent paragraphs, we cover the recent earnings announcement, analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation on the stock.
Earnings Report Review
Target Corporation’squarterly earnings of $1.03 per share beat the Zacks Consensus Estimate of 97 cents, and rose from 92 cents earned in the prior-year quarter.
Total revenue for the quarter climbed 4.6% to $16,240 million from the prior-year quarter, handily beating the Zacks Consensus Estimate of $16,194 million.
Target now projects third-quarter earnings between 70 cents and 75 cents a share, and fiscal 2011 earnings in the range of $4.15 to $4.30.
(Read our full coverage on this earnings report: Target Beats Zacks Estimate)
Agreement of Estimate Revisions
Estimate revision trends for the upcoming third-quarter and fourth-quarter 2011 portrayed mixed sentiments among the analysts. In the last 7 days, 9 out of the 22 analysts covering the stock increased their estimates, while 2 analysts decreased their estimates for third-quarter and fourth-quarter 2011, respectively.
For fiscal 2011 and 2012, 17 and 5 analysts, respectively, have increased their estimates in the last 7 days, while 5 analysts decreased their projections for fiscal 2012.
None of the analysts decreased their estimates for fiscal 2011 in the last 7 days.
Magnitude of Estimate Revisions
In the last 7 days, the Zacks Consensus Estimate for fiscal 2011 went up by 8 cents to $4.22, while it remained stable at $4.39 for fiscal 2012.
For third-quarter and fourth-quarter of 2011, the Zacks Consensus Estimate went up by a penny to 73 cents a share and $1.48 a share, respectively, in the last 7 days.
The current Zacks Consensus for third-quarter 2011 is pegged from a low of 69 cents to a high of 76 cents. For fiscal 2011, the estimates range from $4.07 to $4.36.
Our View
Target’s efficient marketing, multi-channel strategy, product innovation, compelling pricing strategy and new merchandise assortments should help drive comparable-store sales and operating margins over the long term. We expect the company to gain market share, and believe that focusing on consumable items should boost sales and earnings in a sluggish consumer environment.
Target now tends to focus more on store renovations, enhancing store sales productivity, introducing smaller format stores, and eyeing opportunities to open stores in the international markets.
The greater concentration of Target’s revenue generating capability in a few regions of the United Statesposes a competitive threat compared to Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST), which are geographically more diversified and more resourceful.
Consequently, we prefer to have a long-term Neutral recommendation on the stock. Moreover, Target holds a Zacks #3 Rank, which translates into a short-term Hold rating.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
COSTCO WHOLE CP (COST): Free Stock Analysis Report
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