Target Q2 Earnings Beat Looks Great — Until You Strip Out Tariff Refunds
Shares of Target Corp (NYSE:TGT) rallied in early trading on Wednesday, after the company reported its second-quarter results.
The company reported strong sales and traffic, but its high earnings beat was driven by tariff benefits, according to JPMorgan analyst Christopher Horvers
The Target Analyst: Horvers reiterated a Neutral rating on the stock.
While the company reported earnings of $4.11 per share, surpassing consensus of $2.34 per share, excluding tariff refunds of $1.65 per share, earnings were in-line with expectations, Horvers said in the note.
Check out other analyst stock ratings.
He highlighted the following from Target’s second-quarter print:
- Same-store sales growth of 3.8% came in higher than consensus of 2.5%.
- Management indicated "broad-based strength," with traffic up 3.6%, stores growing 2.7%, and digital higher by 8.7%.
- All six merchandising categories recorded growth during the quarter, including +DD Fun101 and +HSD F&B and Beauty.
- Non-merchandising sales grew 20%+ on Roundel, Target Circle 360, and Target+.
- Gross margin expanded by 470 basis points (bps) to 33.7%, topping Street expectations of 29.8%, due to tariff refund benefits of 170 bps.
Target raised its full-year net sales growth guidance to around 5%, from its earlier projection of 4%, the analyst stated. This was above consensus of 4.3%, he added.
Horvers noted that management also revised the following full-year forecasts:
- Operating margin expansion to 140 bps (50 bps excluding tariff refunds), from prior 20 bps. Higher than consensus of 40 bps.
- Earnings of $9.90-$10.90 per share ($8.25-$9.25 per share excluding tariff refunds), from prior $7.50-$8.50 per share. The midpoint of $8.75 per share excluding tariff refunds came in higher than consensus of $8.55 per share.
TGT Price Action: Shares of Target had risen by 4.93% to $160.00 at the time of publication on Wednesday.
Image: Shutterstock