Target TGT will announce its Q2 results on Wednesday, August 21 hopes to follow Walmart’s WMT followed in its footsteps and its omnichannel retail colleague exceeded expectations for sales and profit for the quarter last Thursday.
Most notably, Walmart’s stock is up 7% since its strong second-quarter results and is up 40% year-to-date, easily outperforming Target’s +2%. Let’s see if Target is in for a rally after the earnings release and if it’s time to buy TGT for a stronger rebound.
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Target’s expectations for the second quarter
As Target continues to overcome shrink and other inventory issues, second-quarter revenue is expected to increase 2% to $25.23 billion. More importantly, second-quarter earnings per share are expected to be $2.18, up 21% from earnings per share of $1.80 in the comparable quarter.
Target has beaten earnings expectations in three of its last four quarterly reports, most recently missing first-quarter EPS expectations by -1% in May, reporting earnings of $2.03 per share versus the Zacks Consensus of $2.05.
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Growth & Outlook
According to Zacks estimates, Target’s total revenue is expected to remain almost flat in the current fiscal year 2025, but is expected to increase 3% to $110.68 billion in fiscal year 2026. The bottom line is that annual earnings are expected to increase 3% in fiscal year 2025, with earnings expected to increase another 12% to $10.39 per share in fiscal year 2026.
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Rating comparison
Target’s stock is trading at around $144, giving it an earnings multiple of 15.7, a significant discount to Walmart’s 30.1 and the S&P 500’s 23.4. Additionally, TGT is trading well below its 10-year high of 30.4 and at a slight discount to the median of 16.3 during that time period.
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Conclusion
Given Target’s valuation and favorable growth trajectory, the stock could well see a rally after the earnings release if the company can meet or beat its second-quarter expectations. Currently, Target stock has a Zacks Rank #3 (Hold) as delivering promising quarterly results and positive guidance will be key to TGT’s continued upside.
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