Target Corporation (NYSE: TGT) investors are hoping the company can maintain its 2018 momentum on Aug. 22 when it reports second-quarter earnings. Analysts say Target’s investments in improving its customer experience and beefing up its online business are paying off, but Target may have difficulty clearing Wall Street’s bar in the second quarter.
Analysts are expecting Target to report second-quarter earnings per share of $1.40, up from $1.23 in the same quarter a year ago. Analysts are calling for $17.3 billion in revenue, up 3 percent.
[See: 7 of the Best Dividend Stocks to Buy for 2018.]
Investors will also be watching same-store sales closely. Wall Street analysts are calling for 3.9 percent same-store sales growth in the second quarter. Target reported 3 percent same-store sales growth last quarter but guided for growth in the “low- to mid- single-digit range” in the second quarter. Target blamed bad weather for lackluster sales growth in the first quarter.
Bank of America analyst Robert Ohmes says Wednesday’s report may be a difficult one for Target, but there are plenty of reasons to like TGT stock in the long term. Ohmes is predicting EPS of $1.35 and same-store sales growth of 3 percent, below consensus estimates.
“We also expect TGT to report continued e-commerce momentum as it expands Shipt and Drive Up services, and we see upside to our forecast 22 percent digital sales growth in [the fiscal second quarter],” Ohmes says.
Ohmes is also predicting a 0.6 percent decline in earnings before interest and taxes margins to 6.2 percent in the quarter.
But while Wednesday’s numbers may disappoint Wall Street, Ohmes says TGT stock is positioned to be a long-term winner of a five- to 10-year shift in consumer spending toward discount retailers like Target.
[See: 7 of the Best Stocks to Buy for 2018.]
“We think Discount Store Decade tailwinds and continued comp momentum should support a higher multiple,” Ohmes says.
Ohmes says investors should expect Target to return to EBIT growth in the second half of the year as remodel expenses level off. Wage and labor hour costs are already factored into the company’s guidance, and Target will likely not endure the same uptick in seasonal holiday hiring costs as it did in 2017, he says.
Ohmes is forecasting full-year EPS of $4.71 on revenue of $71.87 billion. Bank of America has a “buy” rating and $90 price target for TGT stock.
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Target Corporation Earnings: What to Expect From TGT Stock originally appeared on usnews.com
