Should Target Stock Be in Your Portfolio Before Q4 Earnings?

Core Viewpoint - Target Corporation is expected to report a decline in fourth-quarter fiscal 2024 revenues and earnings, with a consensus estimate of $30.77 billion in revenues, reflecting a 3.6% year-over-year decrease, and earnings projected at $2.25 per share, indicating a 24.5% drop compared to the previous year [1][9]. Financial Performance - The Zacks Consensus Estimate for fourth-quarter revenues is $30.77 billion, down 3.6% from the same period last year [1]. - Earnings per share are projected at $2.25, suggesting a 24.5% decline year-over-year [1]. - The consensus estimate for earnings has been revised upward by a couple of cents in the past 30 days [1]. Earnings Surprise and Predictions - Target has a trailing four-quarter average earnings surprise of 5%, but in the last reported quarter, it missed the Zacks Consensus Estimate by 19.2% [3]. - The company has an Earnings ESP of +2.18% and a Zacks Rank of 3, indicating a likelihood of an earnings beat [4][5]. Sales and Traffic Growth - Target's total sales for November and December increased by 2.8% year-over-year, with comparable sales growth of 2% [7]. - The company experienced a nearly 3% increase in traffic, driven by strong performances in-store and online [7]. - Discretionary categories, particularly apparel and toys, saw significant sales increases during the holiday period [8]. Operational Challenges - Target anticipates comparable sales growth of approximately 1.5% for the fourth quarter, an improvement from earlier forecasts of flat sales [9]. - Adjusted earnings per share are expected to range from $1.85 to $2.45, down from $2.98 reported in the previous year [9]. - Rising operational expenses are likely to impact profitability, with SG&A expenses expected to deleverage by 60 basis points as a percentage of total revenues [10]. Stock Performance and Valuation - Target's stock price has declined by 8.4% in the past month, contrasting with a 0.3% rise in the Zacks Retail–Discount Stores industry [11]. - The stock trades at a forward 12-month price-to-earnings ratio of 13.23, below its five-year median of 16.32 and the industry average of 33.05, indicating attractive valuation [12]. Growth Strategy - Target's growth strategy includes enhancing digital shopping experiences, investing in stores, and expanding same-day services, positioning the company for long-term success [13][16]. - The company is adapting to evolving consumer preferences, which strengthens its growth potential [16]. Overall Outlook - While Target has capitalized on the holiday season with strong sales growth, profitability concerns due to rising operational costs remain [17]. - An earnings beat is likely, but near-term challenges may overshadow recent sales strength, making the stock a cautious consideration for investors [17].