Target (TGT) Rated Buy on Earnings Estimate Revisions

Target Corporation (TGT) has earned a Zacks Rank #2 (Buy) rating, a designation driven by the size of recent changes in consensus earnings estimates and three other factors related to those revisions. The retailer's stock has returned -1.4% over the past month, underperforming the Zacks S&P 500 composite's +2.4% gain and the Zacks Retail - Discount Stores industry's 4.5% increase during the same period.

Zacks Investment Research prioritizes changes in future earnings projections as the primary determinant of a stock's fair value, noting that empirical research shows a strong correlation between trends in earnings estimate revisions and near-term price movements. For the current quarter, Target is expected to post earnings of $2.08 per share, representing a year-over-year change of +16.9%. The Zacks Consensus Estimate for this period has changed +1% over the last 30 days.

Looking at the current fiscal year, the consensus earnings estimate stands at $10.43, pointing to a +37.8% change from the prior year. This estimate has shifted +0.5% over the last 30 days. For the next fiscal year, the consensus earnings estimate is $9.44, indicating a -9.5% change from what Target is expected to report a year ago, with the estimate changing +0.4% over the past month.

Revenue growth remains a key component of financial health for the retailer. The consensus sales estimate for the current quarter is $26.37 billion, reflecting a year-over-year change of +4.3%. Estimates for the current and next fiscal years are $110.11 billion and $113.56 billion, respectively, indicating changes of +5.1% and +3.1%. In its last reported quarter, Target generated revenues of $26.54 billion, a year-over-year increase of +5.3%, and reported EPS of $2.46 compared to $2.05 a year earlier.

These results represented a surprise against consensus figures. Reported revenues exceeded the Zacks Consensus Estimate of $26.13 billion by +1.57%, while EPS beat consensus by +6.96%. Target has beaten consensus EPS estimates in each of the trailing four quarters and topped consensus revenue estimates twice during that span.

The company's valuation is graded B on the Zacks Value Style Score, indicating that Target is trading at a discount to its peers based on traditional and unconventional valuation metrics. This grade helps identify whether the stock is overvalued, rightly valued, or temporarily undervalued relative to its historical and peer comparisons.