Target (TGT) Stock: Beats Earnings, Still In Trouble

Target Corporation (NYSE: TGT) is having an overwhelmingly strong start to the trading session today, and for good reason. The company released its earnings for the first quarter, blowing away even its own expectations. This led to excitement among investors and gains in the stock. As is usual, our partners at Trade Ideas were the first to alert us to the gains. At the moment (10:05), TGT is trading at $56.16 per share after a gain of $1.66 per share or 3.05% thus far today. So, why is the company still in trouble? We’ll talk about that below.

TGT Earnings Excite Investors But Point To Troubling Times

As mentioned above, Target is having a strong day in the market today. After reporting better-than expected earnings, the stock is soaring. However, there’s still a bit of doom and gloom here to be honest.

First and foremost, TGT reported revenue in the amount of $16.02 billion. Not only did this beat analyst expectations, it beat the company’s own top guidance. However, there’s still a bit of a problem here. On a year over year basis, revenue was down 1.1%, further outlining the struggles that brick and mortar retail companies in the United States are facing.

On the earnings side of the coins, things look even better… and worse. During the first quarter, TGT reported earnings in the amount of $1.21 per share. This seemed to be overwhelmingly positive news as this figure was 33% higher than analyst expectations. However, the truth of the matter is that if we look at a year-over-year view, things aren’t so pretty. In fact, in terms of YOY, earnings fell by 6.1%.

Target Seems To Be Admitting That Harder Times Are Coming

This is where things get very interesting. The reality is that when a publicly traded company produces revenue that’s 20% above their own top-line guidance, we tend to see changes to the guidance for the full year. After all, if Q1 was better than expected, it will lend a hand to full year revenue coming in better than expected as well.

However, that wasn’t the case. In fact, TGT made absolutely no changes to its guidance. This simple fact points to a very grim reality. At the end of the day, without a change in guidance, the company is insinuating that the rest of the year may not be quite as positive as investors expected to see when they saw the full year guidance in the first place. So, by admission via action, the company is simply saying “Get ready for headwinds!”

Stop wasting your time! Find winning trades in minutes with Trade Ideas!

What We’ll Be Watching For Ahead

Moving forward, the CNA Finance team will be watching TGT incredibly closely. In particular, we’re interested in following the company throughout the rest of the year to see if things go from bad to worse, but get buttoned up nicely in what seems to be positive reports. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!

Never Miss The News Again

Do you want real-time, actionable news delivered to your inbox? Join the CNA Finance mailing list below!

Subscribe Today!

* indicates required

Leave a Comment