Target earnings are coming - the bottom line is investors are nervous
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Expectations are running low on Target Corporation (NYSE:TGT) ahead of the retailer's earnings report on May 17. Shares have peeled off 7% over the last four weeks with 21 of the last 24 analyst revisions coming in to the downward side. Target has fallen even more than retail peers amid the rising concerns over consumer discretionary spending.
Morgan Stanley analyst Simeon Gutman thinks the market is looking for a slight comparable sales miss from Target (TGT) and cautious guidance driven by weaker discretionary/general merchandise trends, consistent with broader macro choppiness in the quarter.
The TGT margin line will be a major focus with the consensus estimate for 4.6% EBIT margin standing just slightly ahead of Target's (TGT) own guidance for a mark of 4.5%. Mix and shrink are expected to have worked against the retailer during the quarter. Significant downside is seen if Target (TGT) were to have increased promotional/markdown activity more than anticipated.
JPMorgan lowered its price target on Target (TGT) to $175 due to concerns over margins and the EPS line. The stock was also placed on the firm's Negative Catalyst Watch in an indication shares could get an earnings jolt.
Wildcards on the Target's (TGT) earnings call could be the retailer's update on food demand and color on the impact of the Bed, Bath & Beyond (BBBY) bankruptcy filing.Previously: Onconova Therapeutics Q1 Earnings Preview (May 14)
Options trading implies a 7.7% move up or down for Target (TGT) after the earnings report drops. Shares bounced 1.1% higher after the Q4 report.