Q4 Preview: Target (TGT) Analysts Keep Eyes on Margins and Expenses Going Forward

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TGT Hot Sheet

Rating Summary:
9 Buy, 10 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0

Shares of Target Corporation (NYSE: TGT) are trading up roughly 0.7 percent Wednesday ahead of the release of its fourth-quarter results before the opening bell on February 23rd.

The Wall Street quarterly consensus for Target is $1.40 per share in earnings on $21.2 billion in revenue. During the fourth quarter of last year, the company reported earnings of $1.38 per share on $20.66 billion in total sales. The company’s guidance calls for earnings of $1.35-$1.43 per share.

For the full year 2011, analysts on the Street are currently estimating earning of $4.24 per share on $69.68 billion in total sales.

The fourth quarter conference call is scheduled for 9:30 am ET on February 23, 2012. Dial-in: 1-866-359-9310 (pass code: Target)

According to data from Bloomberg, shares of Target have 16 Buy ratings, 12 Hold ratings and zero Sell rating. The average price target on shares of TGT is $58 with a range from $46 to $67.

Analyst Comments:

Goldman Sachs forecasts earnings will fall inline with expectations as comps come in at low 2.2 percent. The firm forecasts margins will decline by 25 basis points, while SG&A costs remain flat as a percentage of sales.

Goldman notes CFO Doug Scovanner will most likely offer conservative guidance going forward and announce the company is recalibrating its sales cadence to focus on 3-4 percent comps in Q1-Q3.

An analyst at Goldman commented, “In our view, this near-trough multiple remains overly punitive given easing dilution in 2013 as stores in Canada open. Therefore, we remain buyers of the stock, but we do not believe Q4 results will serve as a meaningful positive catalyst given our expectation for in line EPS and conservative guidance. Instead, we look for shares to move higher as fundamentals in the retail segment re-accelerate during Q1 to drive multiple expansion.”

Goldman reaffirmed its Buy rating on the company ahead of the release.
JPMorgan predicts earnings will miss expectations by $0.01 as gross margins fall by 30 basis points and EBIT margins decline by 60 basis points.

“We believe the optionality of accelerated earnings growth in the future combined with a relatively lower valuation is balanced by the challenges of the business,” reports an analyst at JPMorgan. “Moreover, recent management turnover creates increased uncertainty in a tough environment while the company is pushing into Canada. While TGT looks seemingly inexpensive compared to its peers and historical valuation, we believe relatively discounted multiples are justified.”

JPMorgan remains Neutral on the stock with its $55 price target ahead of the quarterly results.

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