Target (NYSE:TGT) is scheduled to announce its results for the third quarter of fiscal 2022 on Wednesday, November 16. The retailer’s margins and earnings are expected to be under pressure due to a tough macro backdrop and an expected decline in consumer spending on discretionary goods. TGT stock is down 25% year-to-date as investors are concerned about the impact of an economic downturn on the retailer’s business.
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Target’s Q3 Earnings Expected to Decline
Target’s Q2 adjusted earnings per share (EPS) declined by a massive 89% year-over-year to $0.39 and significantly lagged the analysts’ consensus estimate of $0.72. Despite a 3.5% rise in revenue, the company’s profitability fell due to higher markdowns taken to clear the inventory and increased costs.
Analysts expect the company’s Q3 adjusted EPS to decline 29% year-over-year to $2.16. The company’s efforts to right-size inventory and increased freight and other costs are expected to weigh on Q3 profitability. Meanwhile, revenue is projected to come in at $26.4 billion, reflecting growth of nearly 3%.
Is TGT a Buy Now?
Heading into the Q3 results of major retailers, Deutsche Bank analyst Krisztina Katai opines that Walmart (WMT), BJ’s Wholesale (BJ), and Dollar Tree (DLTR) are likely to exceed the Street’s estimates.
Coming to Target, Katai stated, “We believe TGT’s print will at best be in line, combined with a likely 4Q guidance cut given softer discretionary demand trends and what appear to be ongoing clearing activity at the retailer.” Katai maintained a Buy rating on Target stock but lowered the price target to $183 from $193.
Overall, Wall Street is cautiously optimistic about Target stock, with a Moderate Buy consensus rating based on 11 Buys and six Holds. The average TGT stock price target of $190.71 implies 10% upside potential.
Conclusion
Target’s third-quarter earnings are expected to decline due to continued markdowns, lower spending on discretionary categories, and higher costs. Investors will look forward to management’s commentary on the full-year outlook, especially about the crucial holiday season.
As per TipRanks’ Smart Score System, Target earns an eight out of 10, indicating that the stock could outperform the market averages over the long term.
