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Target (TGT) Stock Looks Like a Buy After Walmart's (WMT) Strong Q3
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Walmart (WMT - Free Report) posted better-than-expected quarterly financial results Thursday morning, driven by strong U.S. comps growth and e-commerce sales. The retailer also raised its full-year profit outlook. So, is now the time to buy Target (TGT - Free Report) stock as the two traditional retailers prove they can thrive in an Amazon (AMZN - Free Report) -driven shopping climate?
WMT Q3 Overview
Walmart’s adjusted quarterly earnings climbed slightly from the year-ago period to reach $1.08 per share, which topped our Zacks Consensus Estimate of $1.02 per share. Meanwhile, the retailer behemoth’s Q3 revenues reached $124.89 billion. This marked a 1.4% jump from the year-ago period to help the company inch by our estimate.
These are clearly not major gains, but investors turn to other positive signs for a company of its size, such as the fact that Q3 marked the 11th straight period of sales growth. Maybe more importantly, Walmart’s U.S. comp sales jumped 3.4%, which came in above our NFM estimate of 2.9% and marked the continuation of a positive trend in this vital retail category.
Plus, Walmart’s U.S. e-commerce sales surged 43%, which topped Q2’s 40% expansion. Overall gains in groceries, as well as household items and apparel drove the company’s domestic strength. Walmart also plans to roll out more pickup and delivery options, while it boosts its business through non-Walmart companies. This includes its recent $16 billion purchase of Indian e-commerce powerhouse Flipkart.
Target Overview
Moving on, one of Walmart’s biggest rivals announced earlier this year its plan to hire 20% more seasonal workers in anticipation of a massive holiday shopping season. Target added a substantial chunk of workers to expand its “Order Pickup” and “Drive Up” services, with an increased focus on “ship-from-store capabilities.”
Target, like Walmart, Kroger (KR - Free Report) , Costco (COST - Free Report) , and many others, has pushed deeper into e-commerce and delivery in an effort to retain and attract more customers. This helped Target deliver overall comparable sales growth, including digital, of 6.5% last quarter, which marked the firm’s strongest quarterly performance since 2005. Plus, Target’s digital comps soared 41%—on top of 32% growth in the year-ago period—and traffic expanded by 6.4%.
Price Movement
Shares of Target have climbed 21% over the last five years, which lags its industry’s 75% climb and the S&P 500’s 54% surge. Yet, we can see that the last year has been much better for Target, aside from the recent downturn. Target stock closed Wednesday at $84.32 per share, down roughly 7% from its 52-week high.
Valuation
Moving on, Target stock is currently trading at 14.9X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to its industry’s 24.3X average and the S&P’s 16.2X. Better yet, TGT is trading right around its five-year median of 14.4X and well below its 20.1X high over this stretch. Therefore, we can reasonably say that TGT’s valuation picture appears solid at the moment.
Outlook & Earnings Trends
Looking ahead, our current Zacks Consensus Estimate is calling for Target’s quarterly revenues to jump 6.75% to $17.79 billion. Better yet, Target’s overall comparable store sales are projected to pop 5%, based on our NFM estimates. This would mark a jump from Q2’s 4.9% comparable store sales expansion and blow away the year-ago quarter’s 0.90% jump.
At the bottom end of the income statement, Target’s adjusted third-quarter earnings are projected to jump by 20.9% to reach $1.10 per share.
Equally important, the company has received a fair amount of upward earnings estimate revisions recently, which we can see in the chart. This means that some analysts are more positive about Target’s future earnings outlook than they were not too long ago.
Bottom Line
Target is currently a Zacks Rank #2 (Buy) based mostly on its recent earnings revision trends. TGT also sports “A” grades for both Value and Growth and a “B” for Momentum in our Style Scores system.
Plus, Target has worked to redesign its stores, while also opening smaller locations in urban areas and college towns. The retailer revamped its digital strategy, pricing strategy, supply chain, and introduced same-day delivery at many locations—made possible by its acquisition of grocery delivery startup Shipt.
On top of all of that, Target announced a quarterly dividend of $0.64 per share, payable on December 10 to shareholders of record as of November 21. This all helps make Target stock worth thinking about amid our current market conditions.
Target is scheduled to release its Q3 financial results before the opening bell on Tuesday, November 20.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Target (TGT) Stock Looks Like a Buy After Walmart's (WMT) Strong Q3
Walmart (WMT - Free Report) posted better-than-expected quarterly financial results Thursday morning, driven by strong U.S. comps growth and e-commerce sales. The retailer also raised its full-year profit outlook. So, is now the time to buy Target (TGT - Free Report) stock as the two traditional retailers prove they can thrive in an Amazon (AMZN - Free Report) -driven shopping climate?
WMT Q3 Overview
Walmart’s adjusted quarterly earnings climbed slightly from the year-ago period to reach $1.08 per share, which topped our Zacks Consensus Estimate of $1.02 per share. Meanwhile, the retailer behemoth’s Q3 revenues reached $124.89 billion. This marked a 1.4% jump from the year-ago period to help the company inch by our estimate.
These are clearly not major gains, but investors turn to other positive signs for a company of its size, such as the fact that Q3 marked the 11th straight period of sales growth. Maybe more importantly, Walmart’s U.S. comp sales jumped 3.4%, which came in above our NFM estimate of 2.9% and marked the continuation of a positive trend in this vital retail category.
Plus, Walmart’s U.S. e-commerce sales surged 43%, which topped Q2’s 40% expansion. Overall gains in groceries, as well as household items and apparel drove the company’s domestic strength. Walmart also plans to roll out more pickup and delivery options, while it boosts its business through non-Walmart companies. This includes its recent $16 billion purchase of Indian e-commerce powerhouse Flipkart.
Target Overview
Moving on, one of Walmart’s biggest rivals announced earlier this year its plan to hire 20% more seasonal workers in anticipation of a massive holiday shopping season. Target added a substantial chunk of workers to expand its “Order Pickup” and “Drive Up” services, with an increased focus on “ship-from-store capabilities.”
Target, like Walmart, Kroger (KR - Free Report) , Costco (COST - Free Report) , and many others, has pushed deeper into e-commerce and delivery in an effort to retain and attract more customers. This helped Target deliver overall comparable sales growth, including digital, of 6.5% last quarter, which marked the firm’s strongest quarterly performance since 2005. Plus, Target’s digital comps soared 41%—on top of 32% growth in the year-ago period—and traffic expanded by 6.4%.
Price Movement
Shares of Target have climbed 21% over the last five years, which lags its industry’s 75% climb and the S&P 500’s 54% surge. Yet, we can see that the last year has been much better for Target, aside from the recent downturn. Target stock closed Wednesday at $84.32 per share, down roughly 7% from its 52-week high.
Valuation
Moving on, Target stock is currently trading at 14.9X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to its industry’s 24.3X average and the S&P’s 16.2X. Better yet, TGT is trading right around its five-year median of 14.4X and well below its 20.1X high over this stretch. Therefore, we can reasonably say that TGT’s valuation picture appears solid at the moment.
Outlook & Earnings Trends
Looking ahead, our current Zacks Consensus Estimate is calling for Target’s quarterly revenues to jump 6.75% to $17.79 billion. Better yet, Target’s overall comparable store sales are projected to pop 5%, based on our NFM estimates. This would mark a jump from Q2’s 4.9% comparable store sales expansion and blow away the year-ago quarter’s 0.90% jump.
At the bottom end of the income statement, Target’s adjusted third-quarter earnings are projected to jump by 20.9% to reach $1.10 per share.
Equally important, the company has received a fair amount of upward earnings estimate revisions recently, which we can see in the chart. This means that some analysts are more positive about Target’s future earnings outlook than they were not too long ago.
Bottom Line
Target is currently a Zacks Rank #2 (Buy) based mostly on its recent earnings revision trends. TGT also sports “A” grades for both Value and Growth and a “B” for Momentum in our Style Scores system.
Plus, Target has worked to redesign its stores, while also opening smaller locations in urban areas and college towns. The retailer revamped its digital strategy, pricing strategy, supply chain, and introduced same-day delivery at many locations—made possible by its acquisition of grocery delivery startup Shipt.
On top of all of that, Target announced a quarterly dividend of $0.64 per share, payable on December 10 to shareholders of record as of November 21. This all helps make Target stock worth thinking about amid our current market conditions.
Target is scheduled to release its Q3 financial results before the opening bell on Tuesday, November 20.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>