Market Overview

Earnings Ahead: Did Target Hit The Mark With Fickle Buyer?

Share:
Earnings Ahead: Did Target Hit The Mark With Fickle Buyer?
Related TGT
Holiday Shopping's Best Performers So Far
Shopping Extravaganza: Black Friday In Focus As Market Keeps Setting Records
On The Ground: November IRA Activity W/Extra Options Fun! (Seeking Alpha)

More insight on these head-scratching consumer-spending trends is coming our way when retailer Target Corporation (NYSE: TGT) reveals how its sales and earnings turned out for Q2.

Some industry analysts fear that Target’s retreat earlier this year from Canada will impact its geographical diversification—most of its competitors have considerably bigger footprints—and could have a bearing on the quarter’s bottom line.

In the earnings release due before Wednesday’s opening bell, analysts reporting to Thomson Reuters are looking for an average per-share profit of $1.11 on topline sales of $17.40 billion for TGT. That’s a 42 percent jump from last year’s $0.78 a share.

Industry analysts are expecting sales to be flat and likely under increased scrutiny. This report will follow revenue misses for Macy’s (M), Kohl’s (KSS), and other retailers in a quarter increasingly notable for its disappointing revenue story. Remember that last year’s results included sales from the shuttered Canadian operations, so digging out a clean number may challenge Wall Street.

Check out more earnings updates here.

Walmart’s results can be somewhat telling of what to expect from Target. Walmart lowered its full-year outlook and missed expectations, but much of that was the result of internal pressures on margins as well as foreign exchange issues, the company said in its Tuesday release. WMT’s U.S. sales at stores open longer than a year were up 1.5 percent and traffic is improving, which could mean that the consumer is looking to the deep discounter to cut costs. That’s the fourth straight quarter that this important sales measure has risen.

Industry analysts expect to see better Target foot traffic both in stores and online, but some analysts are worried that the retailer’s reliance on its signature categories of style, apparel, children’s goods, and wellness leaves it vulnerable to the ebb and flow of consumer spending.

Early Tuesday, short-term options traders were pricing in a relatively tame 2.9 percent move in either direction for TGT shares around the earnings release, according to TD Ameritrade’s thinkorswim® platform. Volatility is high, at the 75th percentile. Put volume also picked up from where it started the week. Action this morning has drawn out buyers of the Aug 79 ½ puts and of the Aug 77 puts (puts contracts represent the right, but not the obligation, to sell the underlying shares at a set date and price).

More key metrics...

As investors await Target’s post-Canada performance, shares have been stuck in sideways action for much of the spring and summer (figure 1). TGT shares just bounced off their 200-day moving average, and resistance is now near 81.90.

tgt-stock-chart_1.jpg

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2015 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

Posted-In: Previews Trading Ideas Best of Benzinga

 

Related Articles (TGT)

View Comments and Join the Discussion!