Target (TGT) is expected to see "several sources" of tailwinds to its core 2025 earnings following a better-than-projected performance in the holiday season, UBS Securities said in a note e-mailed Monday.

The brokerage expects the retailer to generate earnings before interest and taxes of $6.19 billion and per-share earnings of $10.18 for 2025. Wall Street is looking for $5.82 billion and $9.26, respectively, according to UBS.

"We think (Target) could see several sources of tailwinds to its (full-year) EBIT," UBS analysts, including Michael Lasser, said in a note to clients. These are "some shrink recapture," growth in the company's Roundel ad business, and "lapping one-time in nature headwinds" from the second half of last year, the analysts wrote.

The brokerage expects Target to see continued benefits from its cost-reduction program. "We think these drivers alone could add more than ($1 billion) to its (2025) EBIT," the analysts said. However, UBS expects the retailer to take a conservative approach with its guidance amid the ongoing macroeconomic uncertainties, according to the note.

Target has the potential to stabilize its market share this year, UBS said. "From a macro perspective, we think discretionary retailers could see relief, as the recent wallet share shifts to services should moderate," the analysts wrote. Target itself has "several levers" to improve its share in retail, including traffic momentum and an ongoing expansion of its marketplace, UBS said.

The company's shares were up 1.8% in Monday late-afternoon trade.

Last month, the company said it continued to forecast fourth-quarter adjusted EPS of $1.85 to $2.45, but raised its comparable sales growth projection to 1.5% from a prior expectation that it would be flat. "Our team delivered continued traffic growth and better-than-expected holiday-season performance," Chief Executive Brian Cornell said at the time.

UBS expects Target to log EPS of $2.15 and comparable store sales growth of 1.5% when it reports fourth-quarter results March 4. The Street's views are for $2.24 and 1.2% growth, respectively, according to the brokerage. For the ongoing quarter, Target is likely to guide conservatively, with flat to negative same-store sales and EPS around $1.70 to $2, which UBS said would be below the Street's $2.06 estimate.

UBS left its price target on the Target stock unchanged at $170, with a buy rating.

"We believe the stock offers one of the most compelling risk-reward profiles in the hardline, broadline, and food retail sectors," the analysts said. "We think the retailer's opportunity for recovery, rich catalyst path, and inexpensive valuation make it a compelling stock to own heading into 2025."