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What's in Store for Target in 4Q?

by Zacks Equity Research

February 26, 2013 | Comments : 0 Recommended this article: (0)

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Target Corporation ( TGT - Analyst Report ) is set to report its fourth-quarter fiscal 2012 results on Feb 27. In the last quarter it posted a positive surprise of 13.9%. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Target’s efficient marketing, multi-channel strategy, product innovation, compelling pricing strategy, and new merchandise assortments are driving comparable-store sales and operating margins. The company’s P-fresh remodel program and 5% REDcard Rewards program help sustain sales momentum, continue to drive traffic and enhanced customer shopping experience. The company’s focus on “Expect More. Pay Less.” brand promise is also bearing fruit.

Earnings Whispers?

Our proven model does not conclusively show that Target is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, #2 or #3 for this to happen. This is not the case here as you will see below.

Zacks ESP: ESP for Target is 0.00%. This is because the Most Accurate Estimate stands at $1.47, which is in line with the Zacks Consensus Estimate.

Zacks Rank #3 (Hold): Target’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

ConAgra Foods, Inc. ( CAG - Analyst Report ) , Earnings ESP of +1.79% and Zacks Rank #1 (Strong Buy)

New York & Company Inc. ( NWY - Snapshot Report ) , Earnings ESP of +12.50% and Zacks Rank #2 (Buy)

Costco Wholesale Corporation ( COST - Analyst Report ) , Earnings ESP of +0.94% and Zacks Rank #3 (Hold)

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