Image Source: Unsplash

Target Corporation (TGT - Free Report) is likely to report a decline in the top line when it reports second-quarter fiscal 2023 results on Aug 16 before market open. The Zacks Consensus Estimate for revenues is pegged at $25,556 million, indicating a decrease of about 1.9% from the prior-year reported figure.

The bottom line of this general merchandise retailer is anticipated to have increased year over year. Although the Zacks Consensus Estimate for earnings per share for the quarter under review has declined by a couple of cents to $1.48 over the past seven days, it suggests a sharp increase from earnings of 39 cents reported in the year-ago period.

Target has a trailing four-quarter negative earnings surprise of 4.9%, on average. In the last reported quarter, this Minneapolis, MN-based company’s bottom line outperformed the Zacks Consensus Estimate by 17.8%.

Key Things to Note

Consumer spending, a key catalyst for the economy, has shown signs of slowing down. Several factors have come into play, including underlying inflationary pressure, a higher interest rate environment and reductions in pandemic savings. Target might have witnessed soft demand for discretionary products, partly offset by sustained strength in essentials.

Based on soft first-quarter sales trends, Target guided a low-single-digit-decline in comparable sales for the second quarter. We projected a comparable sales decline of 2.1% for the quarter under discussion.

Besides, management guided greater SG&A rate pressure in the second quarter. As a result, the operating margin rate is likely to decrease on a sequential basis. We anticipate a 120-basis points decline in the operating margin on a sequential basis. However, on a year-over-year basis, we estimate a 280-basis points improvement in the operating margin.

Target Corporation Price, Consensus and EPS Surprise

Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote

As a result, the bottom line is expected to showcase year-over-year growth. For the second quarter, the company guided adjusted earnings in the band of $1.30-$1.70 per share, up sharply from 39 cents reported in the year-ago period.

Markedly, management has been undertaking cost-control measures, such as working with vendors and driving continued operational efficiencies. The company’s digital endeavors, store investments and merchandise actions to gain market share are expected to have aided its performance.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Target this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here.

Target has a Zacks Rank #4 (Sell) and an Earnings ESP of -6.82%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

More By This Author:

Bear Of The Day: Corteva
Bull Of The Day: Holley
Target Reports Next Week: Wall Street Expects Earnings Growth