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Category: Stock Market and Target Corporation (TGT)
Date: 20 August 2020 Target (TGT) Stock Price: $154.22 We take a look at the 2nd quarter 2020 earnings report of Target, one of the biggest retailers in the USA. Retailers such as Walmart, The Home Depot and Lowe's reported strong numbers. And it was no different with Target with total revenue increasing 24.7% for the quarter compared to the same quarter of last year, and they recorded net income of for the quarter
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Our second quarter comparable sales growth of 24.3 percent is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9 percent and stores enabling more than three-quarters of Target's digital sales, which rose nearly 200 percent - Brian Cornell "
About Target Corporation
Minneapolis-based Target Corporation (NYSE: TGT) serves guests at nearly 1,900 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 2nd quarter 2020 earnings report
Data below refers to the latest quarters data unless specified otherwise:
- Total Revenue: $22.975 billion (up from $18.422 billion for the same quarter of the previous year)
- Revenue increased by 24.7% over the last 12 months
- Cost of sales: $15.673 billion (up from $12.625 billion for the same quarter of the previous year)
- Cost of sales increased by 24.1% over the last 12 months
- Some margin gain for Target Corporation as their total revenues increased at a slightly faster rate than their cost of sales
- Net earnings: $1.6890 billion (up 80.3 % from $938 million for the same quarter of the previous year)
- Diluted earnings per share: $3.38 (down from $1.83 for the same quarter of the previous year)
- PE ratio of Target: 39.1
- Cash dividends per share: $ 0.68 (up from $0.66 for the same quarter of the previous year)
- Dividend yield of Target Corporation: 1.76%
- Diluted number of shares in issue: 504.4 million (down -2.3% from 516.1 million for the same quarter of the previous year)
- Cash and cash equivalents: $7.284 billion
- Cash and cash equivalents per share: $14.44
- Cash and cash equivalents makes up 9.36% of Target's market capital
- Cash and cash equivalents makes up 15.2% of Target's total assets
- Inventories: $8.876 billion
- Inventories makes up 18.5% of Target's total assets
- Total stockholders equity in Target Corporation: $12.578 billion
- Stockholders equity per share: $24.93
- Target is trading at 6.2 times 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 for 6 months: $5.166 billion
- Cash generated from operations per share (for 6 months): $10.24
Target's management commentary on their 2nd quarter 2020 earnings report
MINNEAPOLIS, Aug. 19, 2020 /PRNewswire/ --
Target Corporation (NYSE: TGT) today announced its second quarter 2020 results, which reflect the continuation of heightened sales volume and significant investments in response to the COVID-19 pandemic. The Company reported GAAP earnings per share (EPS) from continuing operations of $3.35 in the second quarter, an increase of 84.4 percent from $1.82 in 2019. Second quarter Adjusted EPS of $3.38 grew 85.7 percent compared with $1.82 in 2019. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
"Our second quarter comparable sales growth of 24.3 percent is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9 percent and stores enabling more than three-quarters of Target's digital sales, which rose nearly 200 percent. We also generated outstanding profitability in the quarter, even as we made significant investments in pay and benefits for our team," said Brian Cornell, chairman and chief executive officer of Target Corporation. "We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year. With our differentiated merchandising assortment, a comprehensive set of convenient fulfillment options, a strong balance sheet, and our deeply dedicated team, we are well-equipped to navigate the ongoing challenges of the pandemic, and continue to grow profitably in the years ahead."
- Second quarter comparable sales grew 24.3 percent, the strongest the Company has ever reported.
- Store comparable sales increased 10.9 percent. Digital comparable sales grew 195 percent, accounting for 13.4 percentage points of Target's comparable sales growth.
- Stores fulfilled more than 90 percent of Target's second quarter sales.
- Same-day services (Order Pick Up, Drive Up and Shipt) grew 273 percent and accounted for approximately 6 percentage points of total Company comparable sales growth.
- The Company saw unusually strong market-share gains across all five of its core merchandise categories. In the first half of the year, the Company has gained approximately $5 billion in market share.
- Second quarter GAAP EPS from continuing operations of $3.35 was 84.4 percent higher than last year, and Adjusted EPS1 of $3.38 was 85.7 percent higher than last year, as strong operating performance offset unprecedented investments in team member pay & benefits.
Target Corporation (NYSE: TGT) today announced its second quarter 2020 results, which reflect the continuation of heightened sales volume and significant investments in response to the COVID-19 pandemic. The Company reported GAAP earnings per share (EPS) from continuing operations of $3.35 in the second quarter, an increase of 84.4 percent from $1.82 in 2019. Second quarter Adjusted EPS of $3.38 grew 85.7 percent compared with $1.82 in 2019. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
"Our second quarter comparable sales growth of 24.3 percent is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9 percent and stores enabling more than three-quarters of Target's digital sales, which rose nearly 200 percent. We also generated outstanding profitability in the quarter, even as we made significant investments in pay and benefits for our team," said Brian Cornell, chairman and chief executive officer of Target Corporation. "We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year. With our differentiated merchandising assortment, a comprehensive set of convenient fulfillment options, a strong balance sheet, and our deeply dedicated team, we are well-equipped to navigate the ongoing challenges of the pandemic, and continue to grow profitably in the years ahead."
Fiscal 2020 Guidance
During the first quarter, the Company withdrew its guidance given the unusually wide range of potential outcomes, in light of the highly fluid and uncertain outlook for consumer shopping patterns and government policies related to COVID-19.
Interest Expense and Taxes
The Company's second quarter 2020 net interest expense was $122 million, compared with $120 million last year.
Second quarter 2020 effective income tax rate was 22.8 percent, compared with 23.0 percent last year, reflecting a larger rate benefit from discrete items, primarily related to share-based payments, compared with the prior year.
Shareholder Returns
The Company paid dividends of $330 million, compared with $328 million in second quarter 2019, reflecting a 3.1 percent increase in the dividend per share, partially offset by a decline in average share count. On March 25, 2020, the Company announced that it had suspended share repurchase activity as a result of the high level of uncertainty in the current environment. As of the end of the second quarter, the Company had approximately $4.5 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in September 2019.
For the trailing twelve months through second quarter 2020, after-tax return on invested capital (ROIC) was 17.2 percent, compared with 15.2 percent for the twelve months through second quarter 2019. The increase to ROIC was driven primarily by increased profitability combined with a small decrease in capital base. The tables in this release provide additional information about the Company's ROIC calculation.
During the first quarter, the Company withdrew its guidance given the unusually wide range of potential outcomes, in light of the highly fluid and uncertain outlook for consumer shopping patterns and government policies related to COVID-19.
Interest Expense and Taxes
The Company's second quarter 2020 net interest expense was $122 million, compared with $120 million last year.
Second quarter 2020 effective income tax rate was 22.8 percent, compared with 23.0 percent last year, reflecting a larger rate benefit from discrete items, primarily related to share-based payments, compared with the prior year.
Shareholder Returns
The Company paid dividends of $330 million, compared with $328 million in second quarter 2019, reflecting a 3.1 percent increase in the dividend per share, partially offset by a decline in average share count. On March 25, 2020, the Company announced that it had suspended share repurchase activity as a result of the high level of uncertainty in the current environment. As of the end of the second quarter, the Company had approximately $4.5 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in September 2019.
For the trailing twelve months through second quarter 2020, after-tax return on invested capital (ROIC) was 17.2 percent, compared with 15.2 percent for the twelve months through second quarter 2019. The increase to ROIC was driven primarily by increased profitability combined with a small decrease in capital base. The tables in 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
Target (NYSE: TGT) stock performance compared to Kroger (NYSE: KR)
The image below shows the stock performance of Target (TGT) and Kohl (KSS) over the last 5 years. Both firms are active in the retail space in the USA. But looking at the stock price performances of these two firms it doesn't look like both of them are active in the same space as their stock price performances are totally different. The summary below shows the stock price performance of these two firms over the last 5 years:
The stock of Target (TGT) has easily outperformed the stock of Kohl's over the last 5 years.
- Target (TGT): 96%
- Kohls (KSS): -62.6%
The stock of Target (TGT) has easily outperformed the stock of Kohl's over the last 5 years.
Recent coverage of Target (TGT)
The extract below discusses the latest regarding Target as obtained from CNBC.com
Big-box discount chain Target (TGT) obliterated second-quarter forecasts early Wednesday, after rival Walmart (WMT) crushed expectations but cautioned that sales have started to "normalize" as the coronavirus stimulus fades. TGT stock rose early Wednesday.
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Target EarningsEstimates: Wall Street expected Target earnings per share to slip 11% to $1.62, according to Zacks Investment Research. Revenue was seen rising 9% to $20.14 billion. Same-store sales were seen swelling 8.6%, according to Consensus Metrix.
Results: Target earnings shot up 86% to $3.38 a share, with revenue up 25% to $22.98 billion. Same-store sales surged 24.3%, including an in-store gain of 10.9%. Digital sales shot up 195%. Same-day services, including order pick up, drive up and online delivery, roared 273%.
In May, Target beat first-quarter earnings forecasts amid panic buying as coronavirus lockdown took hold. Same-store sales jumped 10.8%, while comparable digital sales surged 141%, including a 282% pop in April.
But costs have also been going up, including wage hikes as well as more protective gear for workers and in-store modifications to mitigate infection risks.
Read the full article here
Big-box discount chain Target (TGT) obliterated second-quarter forecasts early Wednesday, after rival Walmart (WMT) crushed expectations but cautioned that sales have started to "normalize" as the coronavirus stimulus fades. TGT stock rose early Wednesday.
Volume 0%
02:37
02:37
Target EarningsEstimates: Wall Street expected Target earnings per share to slip 11% to $1.62, according to Zacks Investment Research. Revenue was seen rising 9% to $20.14 billion. Same-store sales were seen swelling 8.6%, according to Consensus Metrix.
Results: Target earnings shot up 86% to $3.38 a share, with revenue up 25% to $22.98 billion. Same-store sales surged 24.3%, including an in-store gain of 10.9%. Digital sales shot up 195%. Same-day services, including order pick up, drive up and online delivery, roared 273%.
In May, Target beat first-quarter earnings forecasts amid panic buying as coronavirus lockdown took hold. Same-store sales jumped 10.8%, while comparable digital sales surged 141%, including a 282% pop in April.
But costs have also been going up, including wage hikes as well as more protective gear for workers and in-store modifications to mitigate infection risks.
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 $130 (up from our 1st quarter 2020 earnings valuation of Target Corporation) We therefore believe the stock of Target Corporation's is overvalued at its current price of $154.22
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $130. A good entry point into Target would therefore be at $117 or below. We therefore expect the stock of Target to pull back from current levels to levels closer to our target price in coming weeks and months as we believe the stock price rally has gone to far.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $130. A good entry point into Target would therefore be at $117 or below. We therefore expect the stock of Target to pull back from current levels to levels closer to our target price in coming weeks and months as we believe the stock price rally has gone to far.
Next earnings release of Target (TGT)
It is expected that Target will release their 3rd quarter 2020 earnings report in late November 2020