Target TGT headlined Tuesday’s trading session with a remarkable spike of +12% after exceeding fourth-quarter expectations. Despite a +17% surge year-to-date, the stock remains plagued by a -20% dip over the last two years. Nevertheless, CEO Brian Cornell expresses determination to revive the retail giant’s profitability and mojo.
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Improved Traffic Trends Boost Q4 Results
Target witnessed another quarter of improved traffic, propelling its post-earnings rally. Consumer shopping behavior increasingly favors Target, with its same-day services experiencing a significant 13.6% sequential increase, now comprising 10% of total sales through in-store pickups, drive-ups, and shipments.
In a year-over-year comparison, Target’s Q4 earnings surged by 57% to $2.98 per share, outperforming the Zacks Consensus by an impressive 23%. Additionally, fourth-quarter revenue of $31.91 billion marked a 2% YoY rise, exceeding estimates of $31.84 billion. Despite a 1% decline in total revenue to $107.4 billion, Target’s annual earnings almost doubled in fiscal 2024 to $8.94 per share.
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Favorable EPS Guidance & Outlook
In the first quarter, Target anticipates EPS to range between $1.70-$2.10 per share, aligning with the current Zacks Consensus of $2.07 per share, signaling 1% growth. For the fiscal year 2025, annual EPS projection stands at $8.60-$9.60 per share, echoing Zacks estimates of $9.17 per share, forecasting a 9% growth.
Reasonable Valuation
Target’s current P/E valuation supports the recent rally, with TGT shares trading at 16.4X forward earnings, a favorable discount compared to the Zacks Retail-Discount Stores Industry average of 22.4X. Furthermore, Target’s stock trades below the S&P 500’s 21.4X and Walmart’s 25.3X.
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Key Takeaways
Target’s revitalization is evident in its cash flow, more than doubling in FY24 to $8.6 billion. At the moment, Target’s stock boasts a Zacks Rank #2 (Buy), indicating its potential to outperform the broader market in the short term.
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