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Why Is Target (TGT) Up 18.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Target (TGT - Free Report) . Shares have added about 18.4% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Target due for a pullback? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Target Corporation before we dive into how investors and analysts have reacted as of late.
Target Corporation reported third-quarter fiscal 2025 results, with revenues and earnings declining from the prior-year period. While the top line missed the Zacks Consensus Estimate, the bottom line beat the same. Also, the company witnessed a decline in comparable sales, reflecting ongoing pressure in consumer discretionary categories. Despite the challenging environment, Target continued to show resilience in digital growth and non-merchandise revenue streams, aided by strength in membership, marketplace and Roundel advertising.
The company reaffirmed confidence in its holiday readiness. Strong execution of fulfillment options, expanded exclusive assortments and continued efficiency gains remain core to Target’s multiyear transformation plan. Management reiterated its focus on strengthening merchandising authority, elevating the guest experience and accelerating technology-driven operational enhancements.
Target reported adjusted earnings of $1.78 per share, which beat the Zacks Consensus Estimate of $1.76 but declined from $1.85 reported in the year-ago period.
The big-box retailer generated total revenues of $25,270 million, which fell short of the Zacks Consensus Estimate of $25,360 million. The metric fell 1.5% on a year-over-year basis. We note that merchandise sales declined 1.9% to $24,752 million, while non-merchandise sales grew 17.7%, fueled by strong growth in Roundel advertising, Target Circle 360 memberships and marketplace contributions.
Meanwhile, comparable sales decreased 2.7%, following a 1.9% decline in the preceding quarter. Comparable sales reflected a drop of 3.8% in comparable store sales but an increase of 2.4% in comparable digital sales. Digital momentum was led by more than 35% growth in same-day delivery via Target Circle 360.
Food & Beverage and Hardlines delivered positive comparable sales growth, while discretionary categories remained pressured as consumers continued to prioritize value and necessity. Traffic, or the number of transactions, dipped 2.2%, while the average transaction amount slid 0.5%.
Gross margin came in at 28.2%, down slightly from 28.3% reported last year, as increased markdowns and mix pressure were mostly offset by lower inventory shrink, higher advertising revenues, and operational efficiencies in supply chain and digital fulfillment. The adjusted operating margin rate was 4.4%, down 20 basis points from the year-ago quarter, and came in line with our estimate.
Target’s Financial Health Snapshot
Target ended the quarter with cash and cash equivalents of $3,822 million, long-term debt and other borrowings of $15,366 million, and shareholders’ investment of $15,501 million. During the quarter, Target paid out dividends of $518 million.
The company repurchased $152 million worth of shares, retiring 1.7 million shares at an average price of $91.59. Target still has approximately $8.3 billion remaining under its August 2021 share repurchase authorization.
A Sneak Peek Into TGT’s FY25 Outlook
Target reaffirmed its fourth-quarter sales outlook. It continues to expect a low-single-digit decline in sales. Adjusted earnings are projected in the band of $7.00-$8.00 per share (versus the prior estimate of $7.00-$9.00), while GAAP earnings per share are anticipated in the range of $7.70-$8.70.
Target’s efforts to improve speed, relevance and value for guests, through thousands of new exclusive items, expanded next-day shipping reach, aggressive price investments on essentials, and strong gift-oriented assortments, are expected to support traffic recovery as macro pressures gradually ease.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Target has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock has 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Target has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Target (TGT) Up 18.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Target (TGT - Free Report) . Shares have added about 18.4% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Target due for a pullback? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Target Corporation before we dive into how investors and analysts have reacted as of late.
Target Q3 Earnings Beat Estimates, Sales Decline Amid Soft Traffic
Target Corporation reported third-quarter fiscal 2025 results, with revenues and earnings declining from the prior-year period. While the top line missed the Zacks Consensus Estimate, the bottom line beat the same. Also, the company witnessed a decline in comparable sales, reflecting ongoing pressure in consumer discretionary categories. Despite the challenging environment, Target continued to show resilience in digital growth and non-merchandise revenue streams, aided by strength in membership, marketplace and Roundel advertising.
The company reaffirmed confidence in its holiday readiness. Strong execution of fulfillment options, expanded exclusive assortments and continued efficiency gains remain core to Target’s multiyear transformation plan. Management reiterated its focus on strengthening merchandising authority, elevating the guest experience and accelerating technology-driven operational enhancements.
Target’s Quarterly Performance: Key Metrics & Insights
Target reported adjusted earnings of $1.78 per share, which beat the Zacks Consensus Estimate of $1.76 but declined from $1.85 reported in the year-ago period.
The big-box retailer generated total revenues of $25,270 million, which fell short of the Zacks Consensus Estimate of $25,360 million. The metric fell 1.5% on a year-over-year basis. We note that merchandise sales declined 1.9% to $24,752 million, while non-merchandise sales grew 17.7%, fueled by strong growth in Roundel advertising, Target Circle 360 memberships and marketplace contributions.
Meanwhile, comparable sales decreased 2.7%, following a 1.9% decline in the preceding quarter. Comparable sales reflected a drop of 3.8% in comparable store sales but an increase of 2.4% in comparable digital sales. Digital momentum was led by more than 35% growth in same-day delivery via Target Circle 360.
Food & Beverage and Hardlines delivered positive comparable sales growth, while discretionary categories remained pressured as consumers continued to prioritize value and necessity. Traffic, or the number of transactions, dipped 2.2%, while the average transaction amount slid 0.5%.
Gross margin came in at 28.2%, down slightly from 28.3% reported last year, as increased markdowns and mix pressure were mostly offset by lower inventory shrink, higher advertising revenues, and operational efficiencies in supply chain and digital fulfillment. The adjusted operating margin rate was 4.4%, down 20 basis points from the year-ago quarter, and came in line with our estimate.
Target’s Financial Health Snapshot
Target ended the quarter with cash and cash equivalents of $3,822 million, long-term debt and other borrowings of $15,366 million, and shareholders’ investment of $15,501 million. During the quarter, Target paid out dividends of $518 million.
The company repurchased $152 million worth of shares, retiring 1.7 million shares at an average price of $91.59. Target still has approximately $8.3 billion remaining under its August 2021 share repurchase authorization.
A Sneak Peek Into TGT’s FY25 Outlook
Target reaffirmed its fourth-quarter sales outlook. It continues to expect a low-single-digit decline in sales. Adjusted earnings are projected in the band of $7.00-$8.00 per share (versus the prior estimate of $7.00-$9.00), while GAAP earnings per share are anticipated in the range of $7.70-$8.70.
Target’s efforts to improve speed, relevance and value for guests, through thousands of new exclusive items, expanded next-day shipping reach, aggressive price investments on essentials, and strong gift-oriented assortments, are expected to support traffic recovery as macro pressures gradually ease.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Target has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock has 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Target has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.