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Target (TGT) Q2 Earnings in Focus: Everything Worth Noting

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Target Corporation (TGT - Free Report) is likely to register an increase in the top line when it reports second-quarter fiscal 2021 results on Aug 18, before the opening bell. The Zacks Consensus Estimate for revenues is pegged at $24,839 million, indicating growth of 8.1% from the prior-year reported figure.

The bottom line of this general merchandise retailer is anticipated to improve marginally year over year. We note that the Zacks Consensus Estimate for earnings per share for the quarter under review has risen 3% to $3.41 over the past seven days. The figure suggests an improvement from $3.38 reported in the year-ago period.

The company has a trailing four-quarter earnings surprise of 62.1%, on average. In the last reported quarter, this Minneapolis, MN-based company surpassed the Zacks Consensus Estimate by 63.3%.

Key Factors to Note

Thanks to its one-stop shopping destination, customers have been opting for Target for its multi-category assortment of owned and exclusive brands as well as popular national brands. The company, which is among the biggest winners amid the pandemic, has been deploying resources to enhance omni-channel capacities, including same-day delivery of in-store purchases and fast track technology improvements. Clearly, these are likely to have favorably impacted the company’s second-quarter performance.

The company’s commitment to offer unique shopping experience with safe and convenient options including contactless Drive Up and Order Pickup, and same-day delivery with Shipt are worth mentioning. Customers have been responding positively to such shopping tools. Markedly, it has been ramping up store openings and remodels, scaling up fulfillment services and enhancing supply chain capabilities.

Industry experts believe that categories such as Apparel and Beauty are likely to have performed well, thanks to budding demand as the economy reopens. However, Food & Beverage category as well as Essentials are likely to have witnessed tough year-over-year comparison due to drop in pantry-loading trends.

On its last earnings call, Target projected mid-to-high single digit growth in comparable sales for the second quarter. The company guided second-quarter operating margin rate to be well above second-quarter fiscal 2019 rate of 7.2% but is unlikely to be as high as last year’s exceptional rate of 10%.

Clearly, aforementioned factors instill optimism regarding the outcome of the results. However, margins still remain an area to watch. Impact of costs associated with digital fulfilment, supply chain and COVID-19 related expenses cannot be ruled out. We note that costs related to additional employee payments and benefits, and investments undertaken to preserve safety and health of customers and team members amid the coronavirus crisis may have weighed on margins.

Target Corporation Price, Consensus and EPS Surprise

Target Corporation Price, Consensus and EPS Surprise

Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Target this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Target has a Zacks Rank #3 and an Earnings ESP of +4.93%.

3 More Stocks With Favorable Combination

Here are three other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Gap (GPS - Free Report) has an Earnings ESP of +53.66% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nordstrom (JWN - Free Report) has an Earnings ESP of +1.61% and a Zacks Rank #2.

Costco (COST - Free Report) has an Earnings ESP of +0.44% and a Zacks Rank #3.

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