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Category: Stock Market and Target Corporation
Date: 21 November 2019 Stock Price: $126.43 We take a look at the 3rd quarter 2019 earnings report of Target, one of the biggest retailers in the USA and the market loved the stock's latest earnings report which saw the share price surge 14% on the day their earnings was released.
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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 3rd quarter 2019 earnings report
Data below refers to the latest quarters data unless specified otherwise:
- Total Revenue: $18.665 billion (up from $17.821 billion for the same quarter of the previous year)
- Revenue increased by 4.7% over the last 12 months
- Cost of sales: $12.935 billion (up from $12.535 billion for the same quarter of the previous year)
- Cost of sales decreased by 3,2% over the last 12 months
- Net earnings: $714 million (up 14.8% from $622 million for the same quarter of the previous year)
- Diluted earnings per share: $1.39 (up from $1.17 for the same quarter of the previous year)
- PE ratio of Target: 19.9
- Cash dividends per share: $ 0.66 (up from $ 0.64 for the same quarter of the previous year)
- Dividend yield: 2.1%
- Diluted number of shares in issue: 514.8 million (down3.1% from 531.2 million for the same quarter of the previous year)
- Cash and cash equivalents: $969 million
- Cash and cash equivalents per share: $1.88
- Cash and cash equivalents makes up 1.48% of Target's market capital
- Cash and cash equivalents makes up 2.2% of Target's total assets
- Inventories: $11.396 billion
- Inventories makes up 26.05% of Target's total assets
- Total stockholders equity in Target Corporation: $11.545 billion
- Stockholders equity per share: $22.42
- Target is trading at 5.64 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
- Cash generated from operations (for the 3 quarters of their fiscal 2019): $4,159 billion
- Cash generated from operations per share (for the 3 quarters of their fiscal 2019): $8.08
Target's management commentary on their 3rd quarter 2019 earnings report and guidance
Target Corporation (NYSE: TGT) today announced its third quarter 2019 performance, including comparable sales growth of 4.5 percent and a 3.1 percent increase in comparable traffic.
Brian Cornell, chairman and CEO of Target, said "The Target team did an excellent job serving our guests and executing our strategy throughout the third quarter. Our third quarter results are further proof of the durability of our strategy, as we're seeing industry-leading strength across multiple metrics, from the top line to the bottom line. Looking ahead, we have ushered in the holiday season with an unwavering commitment to guest service that complements our highly differentiated, value-driven assortment, our exceptional in-store shopping experience as well as an unmatched suite of easy and convenient fulfillment options."
Brian Cornell, chairman and CEO of Target, said "The Target team did an excellent job serving our guests and executing our strategy throughout the third quarter. Our third quarter results are further proof of the durability of our strategy, as we're seeing industry-leading strength across multiple metrics, from the top line to the bottom line. Looking ahead, we have ushered in the holiday season with an unwavering commitment to guest service that complements our highly differentiated, value-driven assortment, our exceptional in-store shopping experience as well as an unmatched suite of easy and convenient fulfillment options."
Shareholder Returns
The Company returned $631 million to shareholders in third quarter 2019, including:
At the end of the third quarter, the Company had approximately $0.3 billion of remaining capacity under the $5 billion share repurchase program approved in 2016. In September 2019, Target's Board of Directors authorized a new $5 billion share repurchase program. Repurchases through this program will begin upon completion of the 2016 program.
For the trailing twelve months through third quarter 2019, after-tax return on invested capital (ROIC) was 15.0 percent, compared with 15.8 percent for the twelve months through third quarter 2018. Excluding the discrete impacts of the Tax Act, ROIC was 15.1 percent for the trailing twelve months ended November 2, 2019, compared with 13.9 percent in the comparable prior-year period. See the tables of this release for additional information about the Company's ROIC calculation.
Fourth Quarter and Full-Year 2019 Guidance
For the fourth quarter, Target expects comparable sales growth of 3 to 4 percent, and GAAP EPS from continuing operations of $1.55 to $1.75 and Adjusted EPS of $1.54 to $1.74. For the full year, the Company now expects GAAP EPS from continuing operations of $6.27 to $6.47 and Adjusted EPS of $6.25 to $6.45, compared with the prior range of $5.90 to $6.20.
The difference between the GAAP and Adjusted ranges reflect an expected $0.01 impact from a discrete item in the fourth quarter and the $0.01 difference recognized through the third quarter. Fourth quarter and full-year 2019 GAAP EPS from continuing operations may include the impact of additional discrete items which will be excluded in calculating Adjusted EPS. The Company announced today that it plans to issue a post-holiday financial update on Wednesday, January 15, 2020.
The Company returned $631 million to shareholders in third quarter 2019, including:
- Dividends of $337 million, compared with $337 million in third quarter 2018, reflecting a 3.1 percent increase in the dividend per share offset by a decline in share count.
- Share repurchases totaling $294 million that retired 3.0 million shares of common stock at an average price of $99.25.
At the end of the third quarter, the Company had approximately $0.3 billion of remaining capacity under the $5 billion share repurchase program approved in 2016. In September 2019, Target's Board of Directors authorized a new $5 billion share repurchase program. Repurchases through this program will begin upon completion of the 2016 program.
For the trailing twelve months through third quarter 2019, after-tax return on invested capital (ROIC) was 15.0 percent, compared with 15.8 percent for the twelve months through third quarter 2018. Excluding the discrete impacts of the Tax Act, ROIC was 15.1 percent for the trailing twelve months ended November 2, 2019, compared with 13.9 percent in the comparable prior-year period. See the tables of this release for additional information about the Company's ROIC calculation.
Fourth Quarter and Full-Year 2019 Guidance
For the fourth quarter, Target expects comparable sales growth of 3 to 4 percent, and GAAP EPS from continuing operations of $1.55 to $1.75 and Adjusted EPS of $1.54 to $1.74. For the full year, the Company now expects GAAP EPS from continuing operations of $6.27 to $6.47 and Adjusted EPS of $6.25 to $6.45, compared with the prior range of $5.90 to $6.20.
The difference between the GAAP and Adjusted ranges reflect an expected $0.01 impact from a discrete item in the fourth quarter and the $0.01 difference recognized through the third quarter. Fourth quarter and full-year 2019 GAAP EPS from continuing operations may include the impact of additional discrete items which will be excluded in calculating Adjusted EPS. The Company announced today that it plans to issue a post-holiday financial update on Wednesday, January 15, 2020.
Target Corporation (NYSE: TGT) stock price history
The image below, obtained from Google shows Target's stock chart for the last 5 years. Its been a good time for Lowe stockholders over the last 5 years. 5 years ago the stock of Target was trading at around $71.50 and its currently trading at $126.43. Thats a 76.8% return provided to Target stockholders over the last 5 years. Target is trading at very close to its 52 week high of $127.20 and is far away from its 52 week low of $60.15 which to us is a clear indication that the short term sentiment and momentum of Target's stock is extremely positive right now.
Recent coverage of Target
The extract below discusses the latest regarding Target as obtained from TheStreet.com
Somebody had better tell Target (TGT - Get Report) that retail is supposed to be dead. At the same time other major retail names are struggling to compete, Target is surging on the heels of third-quarter earnings. Target is up more than 12% Wednesday, boosted by earnings of $1.36 a share and a higher full-year outlook. That profit number came in well ahead of the $1.19 that analysts were hoping for, on average. That's the third straight price jump following quarterly earnings for Target - and the second straight double-digit move. It puts Target up more than 93.9% year to date, crushing the 22.56% return of the S&P 500 Retailing Index (of which Target is a member) over the same period.
Read the full article here
Somebody had better tell Target (TGT - Get Report) that retail is supposed to be dead. At the same time other major retail names are struggling to compete, Target is surging on the heels of third-quarter earnings. Target is up more than 12% Wednesday, boosted by earnings of $1.36 a share and a higher full-year outlook. That profit number came in well ahead of the $1.19 that analysts were hoping for, on average. That's the third straight price jump following quarterly earnings for Target - and the second straight double-digit move. It puts Target up more than 93.9% year to date, crushing the 22.56% return of the S&P 500 Retailing Index (of which Target is a member) over the same period.
Read the full article here
Target (NYSE: TGT) latest stock valuation
So what do we value Target Corporation's stock at based on their 3rd 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's stock at $114.30. We therefore believe the stock of Target Corporation's is slightly overvalued following the sharp increase in their stock price after the release of their latest earnings report
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 $114.30. A good entry point into Target would therefore be at $102.90 or below. We expect the stock of Target to pull back slightly after the euphoria of their latest earnings release subsides to levels closer to our target (full value) 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 $114.30. A good entry point into Target would therefore be at $102.90 or below. We expect the stock of Target to pull back slightly after the euphoria of their latest earnings release subsides to levels closer to our target (full value) price.
Next earnings release of Target
It is expected that Target will release their 4th quarter and full fiscal 2019 earnings report in late February 2020