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Target (TGT) Q3 Earnings Miss Estimates, Stock Tumbles
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Shares of Target Corporation (TGT - Free Report) are down roughly 10% during the pre-market trading hours, as this Minneapolis-based company reported a negative earnings surprise in the third quarter of fiscal 2018, following a beat in the preceding. However, top line marginally came ahead of the Zacks Consensus Estimate. Moreover, both revenues and earnings continue to improve year over year. Management also reiterated fiscal 2018 earnings projection.
Let’s Delve Deeper
This operator of general merchandise stores reported adjusted earnings of $1.09 per share that fell short of the Zacks Consensus Estimate by a couple of cents but improved 20.2% from the prior-year period. This year-over-year growth can be attributable to higher sales and fall in interest expense as well as share repurchase activity that to an extent offset rise in cost of sales and higher SG&A expenses. Target maintained its fiscal 2018 adjusted earnings guidance of $5.30-$5.50 per share.
The company generated total revenue of $17,821 million that slightly surpassed the Zacks Consensus Estimate of $17,814 million, thus marking the seventh straight beat. Top line increased 5.6% from the year-ago quarter. Sales rose 5.7% to $17,590 million, while other revenue climbed 1.6% to $231 million.
Target is deploying resources to enhance omni-channel capacities, coming up with new brands, remodeling or refurbishing stores, and expanding same-day delivery options. Target has undertaken rationalization of supply chain with same-day delivery of in-store purchases along with technology and process improvements. The company made significant headway in the same-day delivery race by acquiring Internet-based grocery delivery service Shipt to provide same-day delivery of groceries, essentials, home, electronics as well as other products.
These helped this Zacks Rank #2 (Buy) company to gain roughly 36% in a year compared with the industry’s growth of 28%.
Target Corporation Price, Consensus and EPS Surprise
Meanwhile, comparable sales for the quarter increased 5.1% compared with 0.9% growth witnessed in the year-ago period. The number of transactions rose 5.3%, while the average transaction amount fell 0.2%. Comparable digital channel sales surged 49% and added 1.9 percentage points to comparable sales. Management now anticipates comparable sales growth of approximately 5% in the fourth quarter.
Gross margin contracted 90 basis points to 28.7% due to increased supply chain costs on account of digital fulfillment costs, partly mitigated by the benefit of merchandising strategies. Operating margin shriveled 40 basis points to 4.6%.
Target’s debit card penetration contracted 10 basis points to 12.9%, while credit card penetration fell 60 basis points to 10.8%. Total REDcard penetration declined to 23.7% from 24.4% in the year-ago quarter.
Other Financial Details
During the quarter, Target repurchased shares worth $526 million and paid dividends of $337 million. The company still had about $1.8 billion remaining under its $5 billion share buyback program. In the quarter, the company made capital investments of $1,017 million. The company ended the quarter with cash and cash equivalents of $825 million, long-term debt and other borrowings of $10,104 million and shareholders’ investment of $11,080 million.
Dollar General (DG - Free Report) has a long-term earnings growth rate of 13.6% and carries a Zacks Rank #2.
Ross Stores (ROST - Free Report) delivered an average positive earnings surprise of 5.1% in the trailing four quarters. It has a long-term earnings growth rate of 10% and carries a Zacks Rank #2.
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Target (TGT) Q3 Earnings Miss Estimates, Stock Tumbles
Shares of Target Corporation (TGT - Free Report) are down roughly 10% during the pre-market trading hours, as this Minneapolis-based company reported a negative earnings surprise in the third quarter of fiscal 2018, following a beat in the preceding. However, top line marginally came ahead of the Zacks Consensus Estimate. Moreover, both revenues and earnings continue to improve year over year. Management also reiterated fiscal 2018 earnings projection.
Let’s Delve Deeper
This operator of general merchandise stores reported adjusted earnings of $1.09 per share that fell short of the Zacks Consensus Estimate by a couple of cents but improved 20.2% from the prior-year period. This year-over-year growth can be attributable to higher sales and fall in interest expense as well as share repurchase activity that to an extent offset rise in cost of sales and higher SG&A expenses. Target maintained its fiscal 2018 adjusted earnings guidance of $5.30-$5.50 per share.
The company generated total revenue of $17,821 million that slightly surpassed the Zacks Consensus Estimate of $17,814 million, thus marking the seventh straight beat. Top line increased 5.6% from the year-ago quarter. Sales rose 5.7% to $17,590 million, while other revenue climbed 1.6% to $231 million.
Target is deploying resources to enhance omni-channel capacities, coming up with new brands, remodeling or refurbishing stores, and expanding same-day delivery options. Target has undertaken rationalization of supply chain with same-day delivery of in-store purchases along with technology and process improvements. The company made significant headway in the same-day delivery race by acquiring Internet-based grocery delivery service Shipt to provide same-day delivery of groceries, essentials, home, electronics as well as other products.
These helped this Zacks Rank #2 (Buy) company to gain roughly 36% in a year compared with the industry’s growth of 28%.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation Price, Consensus and EPS Surprise | Target Corporation Quote
Meanwhile, comparable sales for the quarter increased 5.1% compared with 0.9% growth witnessed in the year-ago period. The number of transactions rose 5.3%, while the average transaction amount fell 0.2%. Comparable digital channel sales surged 49% and added 1.9 percentage points to comparable sales. Management now anticipates comparable sales growth of approximately 5% in the fourth quarter.
Gross margin contracted 90 basis points to 28.7% due to increased supply chain costs on account of digital fulfillment costs, partly mitigated by the benefit of merchandising strategies. Operating margin shriveled 40 basis points to 4.6%.
Target’s debit card penetration contracted 10 basis points to 12.9%, while credit card penetration fell 60 basis points to 10.8%. Total REDcard penetration declined to 23.7% from 24.4% in the year-ago quarter.
Other Financial Details
During the quarter, Target repurchased shares worth $526 million and paid dividends of $337 million. The company still had about $1.8 billion remaining under its $5 billion share buyback program. In the quarter, the company made capital investments of $1,017 million. The company ended the quarter with cash and cash equivalents of $825 million, long-term debt and other borrowings of $10,104 million and shareholders’ investment of $11,080 million.
Check These 3 Trending Stocks
Burlington Stores (BURL - Free Report) delivered an average positive earnings surprise of 11.4% in the trailing four quarters. It has a long-term earnings growth rate of 20.8% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dollar General (DG - Free Report) has a long-term earnings growth rate of 13.6% and carries a Zacks Rank #2.
Ross Stores (ROST - Free Report) delivered an average positive earnings surprise of 5.1% in the trailing four quarters. It has a long-term earnings growth rate of 10% and carries a Zacks Rank #2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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