What Analysts Are Saying About Target After a Catastrophic Earnings Report

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Target Corp. (NYSE: TGT) reported fourth-quarter and full-year 2016 results Tuesday morning. Unfortunately, this was not the quarter that Target had envisioned. The company posted perhaps the single largest loss over the past year, and things don’t seem to be getting better. Analysts seem to agree.

24/7 Wall St. has included some of the key highlights from the earnings report, as well as what analysts are saying afterward.

For the quarter, Target posted adjusted earnings per share (EPS) of $1.45 and $20.7 billion in revenues. The consensus estimates from Thomson Reuters had called for EPS of $1.51 and $20.74 billion in revenue. In the same period last year, EPS totaled $1.52 and revenues were $21.6 billion.

Same-store sales slipped 4.3% compared with the fourth quarter of 2015, which the company said included a 1.5% drop due to the removal of pharmacy and clinic sales from the calculation.

In its outlook for the first quarter of 2017, Target said it expects a low- to mid-single-digit decline in same-store sales and adjusted EPS of $0.80 to $1.00. Analysts had forecast EPS for the quarter at $1.33 on revenues of $16.22 billion.

Brian Cornell, Target’s CEO, commented:

Our fourth quarter results reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores. At our meeting with the financial community this morning, we will provide detail on the meaningful investments we’re making in our business and financial model which will position Target for long-term, sustainable growth in this new era in retail. We will accelerate our investments in a smart network of physical and digital assets as well as our exclusive and differentiated assortment, including the launch of more than 12 new brands, representing more than $10 billion of our sales, over the next two years. In addition, we will invest in lower gross margins to ensure we are clearly and competitively priced every day. While the transition to this new model will present headwinds to our sales and profit performance in the short term, we are confident that these changes will best-position Target for continued success over the long term.

A few analysts weighed in on Target following the report:

  • Barclays has an Underweight rating and lowered its price target to $50 from $60.
  • Stifel Nicolaus has a $58 price target.
  • Wolfe Research downgraded it to Underperform from Peer Perform.
  • Instinet has a price target of $60.
  • Jefferies reiterated a Hold rating with a $56 price target.
  • Telsey Advisory Group downgraded it to Market Perform and lowered its price target from $78 to $58.
  • Cowen lowered its price target to $64.
  • Morgan Stanley has an Underweight rating and lowered its price target to $52 from $65.
  • Goldman Sachs has a Sell rating and lowered its price target from $67 to $53.
  • UBS reiterated a Neutral rating with a $72 price target.

Shares of Target closed Thursday $57.95, with a consensus analyst price target of $62.35 and a 52-week trading range of $57.30 to $84.14.