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Will Tough Retail Backdrop Hurt Target's (TGT) Q1 Earnings?
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Investors’ don’t seem enthusiastic ahead of Target Corp.’s (TGT - Free Report) first-quarter fiscal 2017 earnings release, which is slated to be announced on May 17. We observe that the stock has declined roughly 2.5% in the past five days. In fact, shares of this operator of general merchandise stores have plunged approximately 14.4% in the past three months, while the Zacks categorized Retail-Discount & Variety industry has declined 3.4%. However, the broader Retail-Wholesale sector of which both are part of, has gained 7.9%.
Per the latest Earnings Preview report as of May 12, Retail-Wholesale sector is likely to witness earnings decline of 1.7% but revenue growth of 3.3%. Let’s take a closer look as to how Target is expected to contribute to the sector’s performance.
What to Expect?
Well the obvious question that comes to mind is, will Target be able to post positive earnings surprise in the quarter to be reported. In the final quarter of fiscal 2016, it delivered a negative earnings surprise of 3.3%. However, in the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 9.3%.
The current Zacks Consensus Estimate for the first quarter of fiscal 2017 is 89 cents down from $1.29 reported in the year-ago period. We noted that the Zacks Consensus Estimate has been stable in the last 30 days. Analysts polled by Zacks expect revenues of $15,614 million, down about 3.6% from the year-ago quarter.
Factors at Play
The retail landscape, which has been undergoing a fundamental change for the past few years, with technology leaving a deep and lasting impact on the space, is also putting pressure on Target. Today, online shopping dominates the minds of consumers. This shift in buying behavior has forced retailers to come up with new ways to market products. Target is deploying resources to significantly develop online platform and store facilities, in order to make shopping more convenient for customers.
The company has also adopted an aggressive cost reduction strategy, including rationalization of supply chain, technology and process improvements as well as corporate restructuring. It also intends to launch new brands and will try to be more competitive in terms of price. Target continues to lay emphasis on developing flexible format stores to penetrate deeper into urban areas. The company plans to expand merchandise assortments with special emphasis on Style, Baby, Kids, and Wellness categories.
However, investors remained concern about Target’s top-line performance. Total sales came below the Zacks Consensus Estimate during the fourth quarter of fiscal 2016, after surpassing the same in the preceding quarter. Moreover, it continues to decline year over year. We note that total sales decreased 4.3%, following declines of 6.7%, 7.2% and 5.4% witnessed in the third, second and first quarters of fiscal 2016, respectively.
The dismal performance compelled management to provide a bleak outlook for fiscal 2017. During the first quarter of fiscal 2017, management anticipates a low-to-mid single digit decline in comparable sales and projects adjusted earnings in the range of 80 cents to $1.00 per share, down from $1.29 recorded in the first quarter of fiscal 2016.
Target Corporation Price, Consensus and EPS Surprise
Our proven model does not conclusively show that Target is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. 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 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at 89 cents. Although, Target’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Best Buy Co., Inc. (BBY - Free Report) has an Earnings ESP of +10.00% and a Zacks Rank #2.
Lowe's Companies, Inc. (LOW - Free Report) has an Earnings ESP of +0.94% and a Zacks Rank #3.
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Will Tough Retail Backdrop Hurt Target's (TGT) Q1 Earnings?
Investors’ don’t seem enthusiastic ahead of Target Corp.’s (TGT - Free Report) first-quarter fiscal 2017 earnings release, which is slated to be announced on May 17. We observe that the stock has declined roughly 2.5% in the past five days. In fact, shares of this operator of general merchandise stores have plunged approximately 14.4% in the past three months, while the Zacks categorized Retail-Discount & Variety industry has declined 3.4%. However, the broader Retail-Wholesale sector of which both are part of, has gained 7.9%.
Per the latest Earnings Preview report as of May 12, Retail-Wholesale sector is likely to witness earnings decline of 1.7% but revenue growth of 3.3%. Let’s take a closer look as to how Target is expected to contribute to the sector’s performance.
What to Expect?
Well the obvious question that comes to mind is, will Target be able to post positive earnings surprise in the quarter to be reported. In the final quarter of fiscal 2016, it delivered a negative earnings surprise of 3.3%. However, in the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 9.3%.
The current Zacks Consensus Estimate for the first quarter of fiscal 2017 is 89 cents down from $1.29 reported in the year-ago period. We noted that the Zacks Consensus Estimate has been stable in the last 30 days. Analysts polled by Zacks expect revenues of $15,614 million, down about 3.6% from the year-ago quarter.
Factors at Play
The retail landscape, which has been undergoing a fundamental change for the past few years, with technology leaving a deep and lasting impact on the space, is also putting pressure on Target. Today, online shopping dominates the minds of consumers. This shift in buying behavior has forced retailers to come up with new ways to market products. Target is deploying resources to significantly develop online platform and store facilities, in order to make shopping more convenient for customers.
The company has also adopted an aggressive cost reduction strategy, including rationalization of supply chain, technology and process improvements as well as corporate restructuring. It also intends to launch new brands and will try to be more competitive in terms of price. Target continues to lay emphasis on developing flexible format stores to penetrate deeper into urban areas. The company plans to expand merchandise assortments with special emphasis on Style, Baby, Kids, and Wellness categories.
However, investors remained concern about Target’s top-line performance. Total sales came below the Zacks Consensus Estimate during the fourth quarter of fiscal 2016, after surpassing the same in the preceding quarter. Moreover, it continues to decline year over year. We note that total sales decreased 4.3%, following declines of 6.7%, 7.2% and 5.4% witnessed in the third, second and first quarters of fiscal 2016, respectively.
The dismal performance compelled management to provide a bleak outlook for fiscal 2017. During the first quarter of fiscal 2017, management anticipates a low-to-mid single digit decline in comparable sales and projects adjusted earnings in the range of 80 cents to $1.00 per share, down from $1.29 recorded in the first quarter of fiscal 2016.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation Price, Consensus and EPS Surprise | Target Corporation Quote
What the Zacks Model Unveils?
Our proven model does not conclusively show that Target is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. 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 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at 89 cents. Although, Target’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
The Home Depot, Inc. (HD - Free Report) has an Earnings ESP of +0.62% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Best Buy Co., Inc. (BBY - Free Report) has an Earnings ESP of +10.00% and a Zacks Rank #2.
Lowe's Companies, Inc. (LOW - Free Report) has an Earnings ESP of +0.94% and a Zacks Rank #3.
5 Trades Could Profit ""Big-League"" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>