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Target (TGT) is scheduled to report results of its second quarter before the market open on Wednesday, August 16, with a conference call scheduled for 8:00 am EDT. What to watch for:

GUIDANCE: In May, Target backed its fiscal 2023 adjusted earnings per share forecast of $7.75-$8.85, which includes expected comparable sales in a wide range from a low-single digit decline to a low-single digit increase and operating income growth of more than $1B. Analysts currently forecast FY23 EPS of $7.81. For the second quarter, Target said it expected adjusted EPS of $1.30-$1.70 and was planning for a "wide range" of sales outcomes centered around a low-single digit decline in comparable sales due to softening sales trends in Q1. Analysts consensus estimates for Q2 currently stand at $1.39 and $25.18B for EPS and revenue, respectively.

Wells Fargo said Target looks poised to cut guidance, as recent controversy has exacerbated macro pressures. Q2 EPS shouldn't be terrible, but Wells expects a full year reset that also negatively reshapes 2024.

EASING SALES MOMENTUM: In July, Raymond James double downgraded Target to Market Perform from Strong Buy without a price target. Target's quarter-to-date sales and traffic trends have remained soft after a step-down earlier in the quarter, which is an indication that the retailer is losing sales momentum, the analyst said. The firm sees signs of overall consumer discretionary spending being weak during Q2, which it says creates greater potential for a higher promotional environment and consumables mix. This could delay Target's margin recovery story, which is a key part of the investment thesis, contended Raymond James.

'CROSS CURRENTS': Barclays lowered the firm's price target on Target to $142 from $163 to reflect the company's slowing sales in Q2. The firm is "generally constructive on the recoverability" of Target's recent weakness over time, but still sees some "cross currents that may push out" the earnings improvement story required for the stock to move higher from here. These include headwinds related to category and customer exposure, and increased competitive dynamics, the analyst told investors in a research note.

Q3 MAY BE OFF TO SOFT START: Piper Sandler lowered the firm's price target on Target to $185 from $220 and kept an Overweight rating on the shares. The analyst believes investors already anticipate downside to the company's Q2 earnings. Based on recent checks and credit/debit card data, the firm lowered its Q2 comp estimate 90 basis points to negative 4.4%. Piper also believes Target's Q3 may have gotten off to a soft start.

Meanwhile, Stifel's customer survey shows positive spending intentions for the fourth consecutive period through early August, and accelerating sequentially from July, but anticipates comp growth will remain negatively impacted by muted discretionary spending.

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