Earnings Preview: Target (TGT, WMT, SHLD)

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Target Corp. (NYSE:TGT) will report earnings Tuesday morning with a conference call to follow.  Shares closed up Friday but are down with the market today.  First Call is expecting EPS to be $0.80 on revenues of $14.7 Billion.  As far as the next quarter, estimates are $0.67 EPS on $15 Billion in revenues. 

Wal-Mart (NYSE:WMT) has already warned on its forecast after earnings.  With the huge wide back-to-school price cuts it instigated it is hard to imagine that Target is not entirely immune.   Analysts are still favorable on the stock and the average stock target is $72.00 or so.  Its chart has been weak with the broad market, with the key difference being that so far even with today’s weakness it hasn’t pierced that $57 to $58 support line.  Options traders are now prepared for an underlying stock move of up to $3.25, and that is compared to what appeared to be up to $3.00 in either direction just on Friday.  Target has been taking business from Wal-Mart, but Tuesday will show if its slightly more upscale customers and cleaner format stores are more immune or subject to the same weakness seen at Wal-Mart.

Just last month, an activist investor unexpectedly came into Target’s wings.  On August 9, Target posted same store sales for July were +6.1% on a total sales gain of 10.8%.  They already gave us the $.363 Billion in total July sales so now it really just boils down to how close analysts can get to the raw EPS number with all the revenue numbers in for the quarter.  Sears Holdings (NASDAQ:SHLD) showed recently that it wasn’t doing too well either, and it would have traded lower had it not used the share buyback game as the offsetting announcement.

Jon C. Ogg
August 20, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.