Target Tops Estimates, but Can’t Catch a Bid

Source: courtesy of Target

Target Corp. (NYSE: TGT) reported third-quarter 2012 adjusted diluted earnings per share (EPS) of $0.90 and $16.93 billion in revenues before markets opened this morning. In the same period a year ago, the big-box retailer reported EPS of $0.82 on revenue of $16.4 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.79 and $19.93 billion in revenue.

On a GAAP basis, Target’s EPS totaled $0.96, which includes a $0.15 gain from the sale of its credit card receivables portfolio.

The company’s CEO did a little cheerleading:

We are well-positioned to deliver strong fourth quarter performance by offering compelling merchandise and unbeatable value …

Target guided fourth-quarter adjusted EPS to a range of $1.64 to $1.74. On a GAAP basis, the range is $0.19 lower on each end, anticipating the company’s expenses related to entering the Canadian market. The consensus estimate for the fourth quarter had been $1.51.

Same-store sales rose 2.9% in the third quarter, with transactions up just 0.5%, but the average transaction amount up 2.4%. Gross margins were down slightly, from 30.5% a year ago to 30.3% this year.

What does appear to be true is that Target’s sale of its credit card portfolio was the right move. The company’s credit card segment posted lower finance charge revenues than a year ago, lower customer fees, and lower merchant fees. Bad debt expense was up and earnings before taxes fell by $20 million. The segment’s net profit was down $5 million year-over-year.

Shares are up about 0.7% in premarket trading, at $61.80 in a 52-week range of $47.25 to $65.80. Thomson Reuters had a consensus analyst price target of around $70.00 before today’s results were announced.

Paul Ausick

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