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Category: Stock Market and Target Corporation
Date: 21 May 2020 Stock Price: $119.63 We take a look at the 1st quarter 2020 earnings report of Target, one of the biggest retailers in the USA. The group saw a sharp increase in sales mainly driven by initial panic buying during the start of the Covid-19 pandemic and larter on by a surge in their online sales.
Throughout the first quarter, our team and guests faced unprecedented challenges arising from the spread of COVID-19. In the face of those challenges, our team showed extraordinary resilience as guests relied on Target as a trusted resource for their families. - Brian Cornell " |
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About Target Corporation
Minneapolis-based Target Corporation (NYSE: TGT) serves guests at more than 1,800 stores and at Target.com. Target is currently ranked as the 8th biggest retailer in the USA and is part of the S&P 500 index.
Overview of Target's 1st quarter 2020 earnings report
Data below refers to the latest quarters data unless specified otherwise:
- Total Revenue: $19.615 billion (up from $17.627 billion for the same quarter of the previous year)
- Revenue increased by 11.3% over the last 12 months
- Cost of sales: $14.501 billion (up from $12.284 billion for the same quarter of the previous year)
- Cost of sales increased by 18.5% over the last 12 months
- Some margin loss for Target Corporation as their total revenues increased at slower rate than their cost of sales (which surged due to increased online sales)
- Net earnings: $284 million (down 64.3% from $795 million for the same quarter of the previous year)
- Diluted earnings per share: $0.56 (down from $1.53 for the same quarter of the previous year)
- PE ratio of Target: 51.7
- Cash dividends per share: $ 0.66 (up from $ 0.64 for the same quarter of the previous year)
- Dividend yield of Target Corporation: 2.3%
- Diluted number of shares in issue: 505.8 million (down -2.6% from 519.5 million for the same quarter of the previous year)
- Cash and cash equivalents: $4.566 billion
- Cash and cash equivalents per share: $9.02
- Cash and cash equivalents makes up 7.8% of Target's market capital
- Cash and cash equivalents makes up 10.2% of Target's total assets
- Inventories: $8.584 billion
- Inventories makes up 19.2% of Target's total assets
- Total stockholders equity in Target Corporation: $11.169 billion
- Stockholders equity per share: $22.08
- Target is trading at 5.25times its stockholders equity per share, which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- The average price to book value of firms in the S&P 500 is currently at 3.7 (Read more about the S&P 500 here)
- Cash generated from operations: $1.284 billion
- Cash generated from operations per share (for the full fiscal 2019): $2.54
Target's management commentary on their 1st quarter 2020 earnings report
MINNEAPOLIS (May 20, 2020) – Target Corporation (NYSE: TGT) today announced its first quarter 2020 results, which reflect the impact of rapidly-evolving shopping patterns and significant investments in response to the COVID-19 pandemic. The Company reported GAAP earnings per share (EPS) from continuing operations of $0.56 in first quarter, compared with $1.53 in 2019. First quarter Adjusted EPS were $0.59, compared with $1.53 in 2019. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
“Throughout the first quarter, our team and guests faced unprecedented challenges arising from the spread of COVID-19. In the face of those challenges, our team showed extraordinary resilience as guests relied on Target as a trusted resource for their families. With our stores at the center of our strategy, and a significant investment in the safety of our team and guests, our operations had the agility and flexibility needed to meet the changing needs of our business,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “With the dedication of our team, the benefit of a sustainable business model and a strong balance sheet, we are confident Target will emerge from this crisis an even stronger retailer, with higher affinity and trust from our guests.”
“Throughout the first quarter, our team and guests faced unprecedented challenges arising from the spread of COVID-19. In the face of those challenges, our team showed extraordinary resilience as guests relied on Target as a trusted resource for their families. With our stores at the center of our strategy, and a significant investment in the safety of our team and guests, our operations had the agility and flexibility needed to meet the changing needs of our business,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “With the dedication of our team, the benefit of a sustainable business model and a strong balance sheet, we are confident Target will emerge from this crisis an even stronger retailer, with higher affinity and trust from our guests.”
Fiscal 2020 Guidance
On March 25th, the Company withdrew its first quarter and full-year guidance given the unusually wide range of potential outcomes as a result of the highly fluid and uncertain outlook for consumer shopping patterns and government policies related to COVID-19. As a result of continued uncertainty, the Company did not provide second-quarter or updated full-year guidance.
Shareholder Returns
The Company returned $941 million to shareholders in first quarter 2020, including: Dividends of $332 million, compared with $330 million in first quarter 2019, reflecting a decline in share count offset by a 3.1 percent increase in the dividend per share. Share repurchases totaling $609 million that retired 5.7 million shares of common stock at an average price of $107.58. Early in the first quarter, the Company exhausted the remaining capacity under the $5 billion share repurchase program approved in 2016 and began repurchasing shares under the new $5 billion repurchase program approved by Target’s Board of Directors in September 2019. As of the end of the first quarter, the Company had approximately $4.5 billion of remaining capacity under the 2019 repurchase program.
On March 25, 2020, the Company announced that it had suspended share repurchase activity as a result of the current environment and the Company’s commitment to maintain its strong investment-grade credit ratings. For the trailing twelve months through first quarter 2020, after-tax return on invested capital (ROIC) was 13.4 percent, compared with 14.3 percent for the twelve months through first quarter 2019. The tables of this release provide additional information about the Company’s ROIC calculation.
On March 25th, the Company withdrew its first quarter and full-year guidance given the unusually wide range of potential outcomes as a result of the highly fluid and uncertain outlook for consumer shopping patterns and government policies related to COVID-19. As a result of continued uncertainty, the Company did not provide second-quarter or updated full-year guidance.
Shareholder Returns
The Company returned $941 million to shareholders in first quarter 2020, including: Dividends of $332 million, compared with $330 million in first quarter 2019, reflecting a decline in share count offset by a 3.1 percent increase in the dividend per share. Share repurchases totaling $609 million that retired 5.7 million shares of common stock at an average price of $107.58. Early in the first quarter, the Company exhausted the remaining capacity under the $5 billion share repurchase program approved in 2016 and began repurchasing shares under the new $5 billion repurchase program approved by Target’s Board of Directors in September 2019. As of the end of the first quarter, the Company had approximately $4.5 billion of remaining capacity under the 2019 repurchase program.
On March 25, 2020, the Company announced that it had suspended share repurchase activity as a result of the current environment and the Company’s commitment to maintain its strong investment-grade credit ratings. For the trailing twelve months through first quarter 2020, after-tax return on invested capital (ROIC) was 13.4 percent, compared with 14.3 percent for the twelve months through first quarter 2019. The tables of this release provide additional information about the Company’s ROIC calculation.
Target Corporation (NYSE: TGT) stock price history
The image below, obtained from Google shows Target's stock chart for the last 5 years. It's been an ok time for Target stockholders over the last 5 years. 5 years ago the stock of Target was trading at around $79.30 and its currently trading at $119.63 Thats a 50.8% return provided to Target stockholders over the last 5 years.
The stock of Target is trading at closer to its 52 week high of $130.24 than it is to its 52 week low of $70.71 which to us is a clear indication that the short term sentiment and momentum of Target's stock price is positive at this point in time
The stock of Target is trading at closer to its 52 week high of $130.24 than it is to its 52 week low of $70.71 which to us is a clear indication that the short term sentiment and momentum of Target's stock price is positive at this point in time
Recent Google search trends for Target stock price and TGT stock price
The graphic below shows the search trends of Target stock price and TGT stock price over the last 12 months in the United States as obtained from Google Trends. As the graphic shows target stock price searches is a more popular search phrase than TGT stock price. So guess if you want more details on Target's stock price you are better off using the term Target stock price instead of TGT stock price.
Target (NYSE: TGT) stock performance compared to Kroger (NYSE: KR)
The image below shows the stock performance of Target (TGT) and Kroger (KR) over the last 3 years. And as it shows the stock of Target has easily outperformed that of Kroger, with Target stock increasing 115.05% over the last 5 years compared to the stock of Kroger that only returned 7.34% over the same time period.
Recent coverage of Target
The extract below discusses the latest regarding Target as obtained from CNBC.com
Target’s digital sales fueled first-quarter gains, but the big-box retailer’s earnings results Wednesday showed it paid a hefty price for that growth as labor costs rose and sales of higher-margin items like apparel dropped. The company’s shares ended the day at $119.63, down nearly 3%.
Target stores have remained open across the country during the coronavirus pandemic, but the crisis has underscored the challenge of making money from e-commerce. As retailers sell more online, they’re also taking on more work, such as picking items, packing them and shipping them. That typically squeezes their profits —whether retailers fill an order for curbside pickup, mail it or deliver it to customers’ doors. Here’s what Target reported for the first quarter ended May 2, compared with what analysts were expecting, according to Refinitiv
Read the full article here
Target’s digital sales fueled first-quarter gains, but the big-box retailer’s earnings results Wednesday showed it paid a hefty price for that growth as labor costs rose and sales of higher-margin items like apparel dropped. The company’s shares ended the day at $119.63, down nearly 3%.
Target stores have remained open across the country during the coronavirus pandemic, but the crisis has underscored the challenge of making money from e-commerce. As retailers sell more online, they’re also taking on more work, such as picking items, packing them and shipping them. That typically squeezes their profits —whether retailers fill an order for curbside pickup, mail it or deliver it to customers’ doors. Here’s what Target reported for the first quarter ended May 2, compared with what analysts were expecting, according to Refinitiv
Read the full article here
Target (NYSE: TGT) latest stock valuation
So what do we value Target Corporation's stock at based on their 4th quarter 2019 earnings report and their fiscal guidance provided? Based on Target Corporation's earnings report and the fiscal guidance provided our valuation model provides a target (full value) price for Target Corporation' stock at $121.90 (up from our 4th quarter 2019 earnings valuation of Target Corporation) We therefore believe the stock of Target Corporation's is slightly undervalued at its current price.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $121.90 A good entry point into Target would therefore be at $109.70 or below. We expect the stock of Target to kick up to levels closer to our target price in coming weeks and months, once the fears surrounding markets subsides and fades away and the markets returns to normal.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $121.90 A good entry point into Target would therefore be at $109.70 or below. We expect the stock of Target to kick up to levels closer to our target price in coming weeks and months, once the fears surrounding markets subsides and fades away and the markets returns to normal.
Next earnings release of Target
It is expected that Target will release their 2nd quarter 2020 earnings report in late August 2020