Target Gains 10% on Outstanding Q4 Results & Positive Outlook

Shares of Target Corporation (TGT) surged as much as 13.7%, after the company reported outstanding results for its fourth quarter and year ending January 29, 2022. TGT also gave a very positive outlook for the ongoing fiscal year 2022.

Target’s Q4 earnings beat expectations by a huge margin, while revenue marginally fell short of estimates.

However, this did not hamper investors’ optimism who were more than happy with the company’s outlook for FY22. Based on current business momentum and resilient demand for its products, Target expects FY22 revenue to grow by low to mid-single-digit, with an operating margin of more than 8% and high single-digit growth in adjusted earnings.

The company even guided positively for FY23 with revenue growth expected in the mid-single-digit, and adjusted earnings expected to grow by high single-digit.  

Shares of the American big-box department store chain ended the day up 9.8% at $219.43 on March 1.

Outstanding Q4 Results

Target posted Q4 adjusted earnings of $3.19 per share, 33 cents better than analysts’ estimates of $2.86 per share. The figure was 19.2% higher than the year-ago quarter’s number of $2.67 per share.

However, Target’s quarterly revenue of $31 billion came in marginally short of analyst estimates of $31.41 billion. Q4 revenue figures grew 9.4% compared to the same period last year. Revenue growth was contributed by a 9.4% increase in sales growth and an 11.1% increase in other revenue.

Moreover, the company’s comparable sales leaped 8.9% year-over-year, with comparable stores sales growing 8.9% and digital sales growing 9.2%.

Full Year Results

Target’s revenue crossed the $100 billion mark for the first time in FY21, reaching a record revenue of $106 billion, reflecting an annual growth of 13.3% over FY20 revenue and more than 35% growth over the past two years.

Likewise, FY21 comparable sales grew 12.7% with all five core merchandise categories growing double-digit comparable sales over 2020.

FY21 adjusted earnings stood at $13.56 per share, growing 44% annually.

CEO Comments

Delighted with the company’s performance, Target Chairman and CEO, Brian Cornell, said, “Our strong fourth-quarter performance capped off a year of record growth in 2021, reinforcing the durability of our business model and our confidence in long-term profitable growth.”

“As we look ahead, we’ll keep investing and delivering on all that has earned the loyalty and trust of our guests; that starts with our outstanding team and includes continued differentiation through affordability, assortment, ease, and convenience,” Cornell concluded.

Analysts’ View

Encouraged by Target’s solid Q4 results and positive outlook, J.P. Morgan analyst Christopher Horvers lifted the price target on the stock to $290 (32.2% upside potential) from $262, while maintaining a Buy rating.

Horvers believes the company’s differentiated offerings in both apparel and home categories will continue to strengthen its position in the retail sector. The analyst sees a long-term favorable growth trajectory for Target given its balanced portfolio of consumables (43%) and discretionary (57%) coupled with its “cheap chic” brand image.

Overall, the TGT stock has a Moderate Buy consensus rating based on 9 Buys and 5 Holds. The average Target price target of $267.85 implies 22.1% upside potential to current levels. Its shares have gained 28.3% over the past year.

Stock Analysis

According to TipRanks’ Smart Score, Target scores a “Perfect 10”, indicating that the stock is highly likely to outperform the market. Bloggers and news articles are bullish on the stock, and hedge funds have increased their holdings of TGT stock by 100.8K shares in the last quarter.

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