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Target (TGT) Down 4.6% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Target Corporation (TGT - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Target Q4 Earnings & Sales Miss Estimates
After three straight quarters of earnings beat, Target Corporation succumbed to a negative earnings surprise of 3.3% in the fourth quarter of fiscal 2016. Total sales also came below the Zacks Consensus Estimate, after surpassing the same in the preceding quarter. Moreover, it failed to contain the decline in the top line. The dismal performance compelled management to provide a bleak outlook for fiscal 2017.
Let’s Unveil the Picture
The company posted adjusted earnings of $1.45 per share that missed the Zacks Consensus Estimate of $1.50 and dovetailed with the lower end of management’s previous provided guidance range of $1.45–$1.55. Earnings per share dropped 4.6% year over year. Including one-time items, earnings from continuing operations came in at $1.46 per share, down 37% from $2.31 reported in the year-ago period.
The company generated total sales of $20,690 million that fell short of the Zacks Consensus Estimate of $20,746 million. We noted that total sales decreased 4.3%, following declines of 6.7%, 7.2% and 5.4% witnessed in the third, second and first quarters, respectively. The sale of the pharmacy and clinic businesses to CVS Health, stiff competition and sluggish traffic impacted the top line.
Nevertheless, Target is focusing on developing its omnichannel capacities. The company also intends to invest in merchandise categories such as Style, Baby, Kids and Wellness. Management will come out with new financial model for fiscal 2017. The company intends to launch new brands and will try to be more competitive in terms of price. It informed that the new model might weigh on sales and profits in the short run but will help firm its position in the long run. The company also plans to open 30 small format stores in fiscal 2017.
Minneapolis-based Target’s comparable sales for the quarter decreased 1.5%. The number of transactions inched up 0.2%, while the average transaction amount declined 1.6%. Comparable digital channel sales surged 34% and added 1.8 percentage points to comparable sales.
Gross profit decreased 7.6% to $5,574 million, while gross margin contracted 100 basis points to 26.9%. Operating income fell 13.5% to $1,344 million, while operating margin shriveled 70 basis points to 6.5%.
Target’s credit card penetration expanded 90 basis points to 11.6%, whereas debit card penetration increased by 40 basis points to 12.7% during the quarter. Total REDcard penetration climbed to 24.3% from 23% in the year-ago quarter.
Other Financial Details
During the quarter, Target repurchased shares worth $565 million and paid dividends of $337 million. The company also completed its previously announced $10 billion share buyback program and commenced repurchasing under its current $5 billion share repurchase program. Under the current authorization, Target bought back shares worth $264 million in the quarter under review. The company still has about $4.7 billion remaining under the current program at the end of the quarter.
The company ended the quarter with cash and cash equivalents (including short-term investments) of $2,512 million, long-term debt and other borrowings of $11,031 million and shareholders’ investment of $10,953 million. Management expects to invest over $2 billion of capital in 2017 and more than $7 billion in the next three years.
A Glance at the Outlook
During the first quarter of fiscal 2017, management expects a low-to-mid single digit decline in comparable sales and projects adjusted earnings in the range of $0.80 to $1.00 per share, down from $1.29 recorded in the first quarter of fiscal 2016. For fiscal 2017, Target forecasts a low-single digit decline in comparable sales and envisions adjusted earnings in the band of $3.80–$4.20 per share, down from $5.01 posted in fiscal 2016.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 32.3% due to these changes.
At this time, Target 's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise shares that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.
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Target (TGT) Down 4.6% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Target Corporation (TGT - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Target Q4 Earnings & Sales Miss Estimates
After three straight quarters of earnings beat, Target Corporation succumbed to a negative earnings surprise of 3.3% in the fourth quarter of fiscal 2016. Total sales also came below the Zacks Consensus Estimate, after surpassing the same in the preceding quarter. Moreover, it failed to contain the decline in the top line. The dismal performance compelled management to provide a bleak outlook for fiscal 2017.
Let’s Unveil the Picture
The company posted adjusted earnings of $1.45 per share that missed the Zacks Consensus Estimate of $1.50 and dovetailed with the lower end of management’s previous provided guidance range of $1.45–$1.55. Earnings per share dropped 4.6% year over year. Including one-time items, earnings from continuing operations came in at $1.46 per share, down 37% from $2.31 reported in the year-ago period.
The company generated total sales of $20,690 million that fell short of the Zacks Consensus Estimate of $20,746 million. We noted that total sales decreased 4.3%, following declines of 6.7%, 7.2% and 5.4% witnessed in the third, second and first quarters, respectively. The sale of the pharmacy and clinic businesses to CVS Health, stiff competition and sluggish traffic impacted the top line.
Nevertheless, Target is focusing on developing its omnichannel capacities. The company also intends to invest in merchandise categories such as Style, Baby, Kids and Wellness. Management will come out with new financial model for fiscal 2017. The company intends to launch new brands and will try to be more competitive in terms of price. It informed that the new model might weigh on sales and profits in the short run but will help firm its position in the long run. The company also plans to open 30 small format stores in fiscal 2017.
Minneapolis-based Target’s comparable sales for the quarter decreased 1.5%. The number of transactions inched up 0.2%, while the average transaction amount declined 1.6%. Comparable digital channel sales surged 34% and added 1.8 percentage points to comparable sales.
Gross profit decreased 7.6% to $5,574 million, while gross margin contracted 100 basis points to 26.9%. Operating income fell 13.5% to $1,344 million, while operating margin shriveled 70 basis points to 6.5%.
Target’s credit card penetration expanded 90 basis points to 11.6%, whereas debit card penetration increased by 40 basis points to 12.7% during the quarter. Total REDcard penetration climbed to 24.3% from 23% in the year-ago quarter.
Other Financial Details
During the quarter, Target repurchased shares worth $565 million and paid dividends of $337 million. The company also completed its previously announced $10 billion share buyback program and commenced repurchasing under its current $5 billion share repurchase program. Under the current authorization, Target bought back shares worth $264 million in the quarter under review. The company still has about $4.7 billion remaining under the current program at the end of the quarter.
The company ended the quarter with cash and cash equivalents (including short-term investments) of $2,512 million, long-term debt and other borrowings of $11,031 million and shareholders’ investment of $10,953 million. Management expects to invest over $2 billion of capital in 2017 and more than $7 billion in the next three years.
A Glance at the Outlook
During the first quarter of fiscal 2017, management expects a low-to-mid single digit decline in comparable sales and projects adjusted earnings in the range of $0.80 to $1.00 per share, down from $1.29 recorded in the first quarter of fiscal 2016. For fiscal 2017, Target forecasts a low-single digit decline in comparable sales and envisions adjusted earnings in the band of $3.80–$4.20 per share, down from $5.01 posted in fiscal 2016.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 32.3% due to these changes.
Target Corporation Price and Consensus
Target Corporation Price and Consensus | Target Corporation Quote
VGM Scores
At this time, Target 's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise shares that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.