The Zacks Consensus Estimates for Target Corporation (TGT) have been portraying an upward trend as the analysts covering the stock have become more constructive after the company posted better-than-expected March sales results and raised its first-quarter 2012 earnings projection.
March Sales in Brief
The Easter holiday and a favorable weather aided Target to post strong sales results for the five-week period ended March 31, 2012. The company registered an increase of 7.3% in comparable-store sales for March 2012, contrary to a 5.5% decline in the prior-year period. Net retail sales rose 7.9% to $6,427 million from $5,955 million reported in the prior-year period.
Management noted that the company’s March sales surpassed its expected growth range, reflecting an increase in average transaction size coupled with a rise in comparable store transactions.
Category wise, comparable-store sales were the strongest in health care, with food increasing in the mid-teens, while household essentials grew in the mid-single-digit range. Apparel and accessories marked a low double-digit increase, while hardlines increased in low single digits. Alongside, the company witnessed increased sales in every region.
What the Company Guided?
Buoyed by the better-than-expected results, Target raised its first-quarter 2012 bottom-line forecast. The company now expects first quarter earnings between of $1.04 and $1.10 per share versus its earlier guidance range of 97 cents to $1.07. Going forward, Target expects comparable-store sales to increase in low to mid-single-digit range for April 2012.
Agreement of Estimate Revisions
The agreement of estimate revisions indicates that the majority of analysts were unidirectional following Target’s March sales results and an upbeat guidance.
In the last 30 days, 11 out of 19 analysts covering the stock raised their estimates, whereas none lowered the same for the first quarter of 2012. For the second quarter, 3 analysts made upward revisions, whereas only 1 analyst trimmed the estimate.
For fiscal 2012, 12 analysts revised their estimates upward, with none revising the same downward in the last 30 days. For fiscal 2013, 9 analysts increased their estimates and only 1 analyst made a downward revision.
Magnitude of Estimate Revisions
Clearly, a positive sentiment is palpable among most of the analysts, who remain optimistic on Target’s performance. The Zacks Consensus Estimate has risen with the majority of analysts remaining bullish on the stock. The magnitude of estimate revisions by the analysts is clearly reflected through changes in the Zacks Consensus Estimates.
The Zacks Consensus Estimate for the first quarter of 2012 jumped 4 cents to $1.00 in the last 30 days. The Zacks Consensus Estimate for the second quarter remained constant at 98 cents in the last 30 days, as the revisions made by the analysts had a neutral impact on it.
For fiscal 2012, the Zacks Consensus Estimate rose 4 cents to $4.25 in the last 30 days. For fiscal 2013, the Consensus Estimate increased by a couple of cents to $4.82.
Closing Comment
Target is consistently trying every means to keep afloat in this sluggish economic environment. The company’s P-fresh remodel program, 5% REDcard Rewards program, City Target stores, The Shops at Target initiatives and its foray into the foreign market are its arsenal to safeguard against any unprecedented event.
However, the greater concentration of Target’s revenue generating capability in a few regions of the United States, poses a competitive threat, compared to Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST), which are geographically more diversified and more resourceful.
Consequently, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Target holds a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.
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