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Why Is Target (TGT) Down 1.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Target (TGT - Free Report) . Shares have lost about 1.3% 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 drivers.
Target Corporation continued with its decent performance in fourth-quarter fiscal 2021. While the top line fell short of the Zacks Consensus Estimate, the bottom line beat the same. Impressively, both revenues and earnings per share grew year over year. Comparable sales increased for the 19th successive quarter. The metric gained from strength in both store and digital channels. However, margins remained under pressure, thanks to supply-chain bottlenecks and higher freight costs.
Without a doubt, Target has been focusing on store refurbishments, enhancing digital capabilities and expanding same-day fulfillment options, keeping speed and convenience in mind. The company provided an upbeat outlook for fiscal 2022.
Sales & Earnings Picture
Target reported adjusted earnings of $3.19 per share that outshone the Zacks Consensus Estimate of $2.86 and rose 19.2% from the year-ago period.
The big-box retailer generated total revenues of $30,996 million that increased 9.4% year over year but missed the Zacks Consensus Estimate of $31,515.5 million. We note that sales jumped 9.4% to $30,616 million, while other revenues rose 11.1% to $380 million.
Meanwhile, comparable sales for the quarter increased 8.9%, backed by 8.1% jump in the number of transactions. Average transaction amount rose 0.7%. Again, digital comparable sales grew 9.2%, while comparable stores sales rose 8.9% during the quarter.
Target’s debit card penetration contracted 90 basis points (bps) to 11.5%, while credit card penetration shrunk 40 bps to 8.9%. Total REDcard penetration declined to 20.4% from the year-ago quarter’s 21.7%.
Margins
During the quarter, gross margin decreased 110 bps to 25.7%, reflecting pressure from higher supply chain costs owing to increased compensation and headcount in the distribution centers as well as higher freight and merchandising costs. Meanwhile, operating margin expanded 30 bps to 6.8%.
Other Financial Details
During the fourth quarter, Target paid dividends of $432 million. This reflected an increase of 32.4% in the dividend per share. The company repurchased shares worth $2.3 billion, thereby retiring 9.7 million shares at an average price of $237.00. At the end of the quarter, the company had roughly $12.3 billion remaining under its share-buyback program approved in August 2021.
The company ended the quarter with cash and cash equivalents of $5,911 million, long-term debt and other borrowings of $13,549 million and shareholders’ investment of $12,827 million.
Outlook
Management expects quarterly, year-over-year profit performance will be variable during the year, and generally improve as the year progresses. It envisions first-quarter fiscal 2022 operating margin rate to be favorable in relation to historical performance but well below first-quarter fiscal 2021 rate of 9.8%.
Target guided low-to-mid-single digit revenue growth, an operating margin rate of 8% or higher, low-single digit growth in operating margin dollars, and high-single digit increase in adjusted earnings per share for fiscal 2022.
In fiscal 2023 and beyond, Target stated that it expects mid-single digit growth in total revenues and high-single digit increase in adjusted earnings per share. It forecast mid-single digit growth in operating income. Management anticipates capital expenditures of $4-5 billion for each year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 5.22% due to these changes.
VGM Scores
Currently, Target has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Target has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Target (TGT) Down 1.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Target (TGT - Free Report) . Shares have lost about 1.3% 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 drivers.
Target’s Q4 Earnings Beat Estimates, Revenues Rise Y/Y
Target Corporation continued with its decent performance in fourth-quarter fiscal 2021. While the top line fell short of the Zacks Consensus Estimate, the bottom line beat the same. Impressively, both revenues and earnings per share grew year over year. Comparable sales increased for the 19th successive quarter. The metric gained from strength in both store and digital channels. However, margins remained under pressure, thanks to supply-chain bottlenecks and higher freight costs.
Without a doubt, Target has been focusing on store refurbishments, enhancing digital capabilities and expanding same-day fulfillment options, keeping speed and convenience in mind. The company provided an upbeat outlook for fiscal 2022.
Sales & Earnings Picture
Target reported adjusted earnings of $3.19 per share that outshone the Zacks Consensus Estimate of $2.86 and rose 19.2% from the year-ago period.
The big-box retailer generated total revenues of $30,996 million that increased 9.4% year over year but missed the Zacks Consensus Estimate of $31,515.5 million. We note that sales jumped 9.4% to $30,616 million, while other revenues rose 11.1% to $380 million.
Meanwhile, comparable sales for the quarter increased 8.9%, backed by 8.1% jump in the number of transactions. Average transaction amount rose 0.7%. Again, digital comparable sales grew 9.2%, while comparable stores sales rose 8.9% during the quarter.
Target’s debit card penetration contracted 90 basis points (bps) to 11.5%, while credit card penetration shrunk 40 bps to 8.9%. Total REDcard penetration declined to 20.4% from the year-ago quarter’s 21.7%.
Margins
During the quarter, gross margin decreased 110 bps to 25.7%, reflecting pressure from higher supply chain costs owing to increased compensation and headcount in the distribution centers as well as higher freight and merchandising costs. Meanwhile, operating margin expanded 30 bps to 6.8%.
Other Financial Details
During the fourth quarter, Target paid dividends of $432 million. This reflected an increase of 32.4% in the dividend per share. The company repurchased shares worth $2.3 billion, thereby retiring 9.7 million shares at an average price of $237.00. At the end of the quarter, the company had roughly $12.3 billion remaining under its share-buyback program approved in August 2021.
The company ended the quarter with cash and cash equivalents of $5,911 million, long-term debt and other borrowings of $13,549 million and shareholders’ investment of $12,827 million.
Outlook
Management expects quarterly, year-over-year profit performance will be variable during the year, and generally improve as the year progresses. It envisions first-quarter fiscal 2022 operating margin rate to be favorable in relation to historical performance but well below first-quarter fiscal 2021 rate of 9.8%.
Target guided low-to-mid-single digit revenue growth, an operating margin rate of 8% or higher, low-single digit growth in operating margin dollars, and high-single digit increase in adjusted earnings per share for fiscal 2022.
In fiscal 2023 and beyond, Target stated that it expects mid-single digit growth in total revenues and high-single digit increase in adjusted earnings per share. It forecast mid-single digit growth in operating income. Management anticipates capital expenditures of $4-5 billion for each year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 5.22% due to these changes.
VGM Scores
Currently, Target has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Target has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.