Target Corp. (TGT) has beaten the Zacks Consensus Estimate in each of the last five quarters by an average of 12.7%.
Growth and Income
The company is expected to grow its earnings per share 15.4% in fiscal 2011, 15.3% in fiscal 2012, and 12.5% per year for the long term. Target’s return on equity is 17.1%, and its stock also offers investors a dividend yield of 1.3%.
This Zacks #2 Rank stock trades at just 14.1x fiscal 2011 consensus EPS estimates and 12.3x fiscal 2012 consensus EPS estimates.
Business
Target operates general merchandise and food discount stores in the U.S. primarily under Target and SuperTarget trademarks.
First-Quarter Results
On May 19, Target reported fiscal first-quarter results. Total revenue was $15.6 billion, an increase of 5.1% from the year-ago quarter. Comp-store sales grew 2.8%. The retailer earned $0.90, topping the Zacks Consensus Estimate by 3 cents.
Outlook
On Target’s Q1 conference call, management indicated that earnings per share of $0.91 for the second quarter and $3.81 for fiscal year 2011 (which ends Jan 2011) are reasonable.
Estimates Trending Higher
Prior to the company’s Q1 earnings report, consensus estimates for Target were moving higher. In the last month, the Zacks Consensus for fiscal 2011 is up 5 cents, while the Zacks Consensus for fiscal 2012 is up 8 cents.
It is still too early for consensus estimates to account for the most recent changes in analysts’ estimates. But, when those estimate changes are factored in, we may see further upward movement in estimates.
Financial Condition
During the first quarter, Target generated nearly $1.2 billion from our operating activities, up about 16% from last year’s first quarter. Thanks to its healthy cash flow and over $1 billion in cash on its balance sheet, Target was able to retire about $1.2 billion of debt, spend about $400 million in capital investments, and repurchase just under $400 million of its shares.
The Chart
Target shares bounced off their 200-day moving average in July 2009. Since that time, the stock is up over 45%. The stock’s steady uptrend, however, was broken in the last few weeks, due to the market sell-off. As long as the market remains weak, TGT may have another date with its 200-day moving average. That could take the stock back down to the $49-$50 area.
