Target Corporation TGT is set to release its fourth-quarter fiscal 2024 earnings on March 4 before the market opens.

The Zacks Consensus Estimate for fourth-quarter revenues stands at $30.77 billion, indicating a 3.6% decline from the same period last year. Meanwhile, earnings are projected at $2.25 per share, suggesting a drop of 24.5% in year-over-year growth. The consensus estimate for earnings has been revised upward by a couple of cents in the past 30 days.

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Target has a trailing four-quarter average earnings surprise of 5%. In the last reported quarter, the company’s bottom line missed the Zacks Consensus Estimate by a margin of 19.2%.
 

What the Zacks Model Predicts About TGT

As investors prepare for TGT’s fourth-quarter announcement, the question looms regarding earnings beat or miss. Our proven model predicts that an earnings beat is likely 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, which is the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target has an Earnings ESP of +2.18% and carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

What’s Shaping Target’s Q4 Earnings?

With the fourth quarter aligning with the holiday shopping season, Target is poised to have benefited from heightened consumer spending. The retailer registered better-than-expected performance buoyed by continued traffic growth. Target also performed exceptionally during key promotional periods, with record-high sales on Black Friday and Cyber Monday contributing to its overall performance.

Target's total sales for November and December increased by 2.8% compared with the previous year, reflecting comparable sales growth of 2%. The company saw a notable uptick in traffic, with an increase of nearly 3%, driven by strong performances both in-store and across digital platforms.

When comparing performance to the third quarter, Target observed a meaningful acceleration in discretionary categories during the holiday period. Apparel and toys saw a significant increase in sales, while beauty and other frequency categories continued to show strength. These results reflect consumers' preference for both seasonal and everyday items, positioning Target as a one-stop destination for shoppers.

For the fourth quarter, Target now anticipates comparable sales growth of approximately 1.5%, better than its earlier forecast of flat comparable sales. However, it continues to anticipate adjusted earnings per share to range from $1.85 to $2.45, which suggests a decline from $2.98 reported in the year-ago period. Rising operational expenses are likely to have weighed on the bottom line. For the fourth quarter, we expect SG&A expenses to deleverage 60 basis points as a percentage of total revenues.

Target Stock Price Performance

Target has seen its stock price decline 8.4% in the past month compared to the Zacks Retail–Discount Stores industry’s rise of 0.3%. The broader Zacks Retail-Wholesale sector has declined 2.7%, while the S&P 500 Index has fallen 2.2% during the same period.

Target’s close competitors, Dollar General Corporation DG and Costco Wholesale Corporation COST, have advanced 3.3% and 2.6%, respectively, while Ross Stores, Inc. ROST has declined 4.6% in the same timeframe.
 

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Does Target Present a Strong Case for Value Investing?

From a valuation perspective, Target shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 13.23, below the five-year median of 16.32, and the Retail-Discount Stores industry’s average of 33.05, the stock offers compelling value for investors seeking exposure to the sector. The stock currently has a Value Score of A, further validating its appeal.
 

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Target Stock Analysis: Best Moves for Investors Now

Target's growth strategy, alongside its innovative customer engagement initiatives, positions the company for long-term success. Its ability to adapt to evolving consumer preferences, coupled with improved operating margins, strengthens its growth potential. By enhancing the digital shopping experience, investing in stores and expanding same-day services, Target is well-positioned to drive future growth. Existing shareholders may choose to hold their positions, while new investors could find the current valuation appealing for making fresh investments.

Final Thoughts on Target’s Q4 Outcome

With Target set to report its fourth-quarter earnings, investors face a mixed outlook. The retailer capitalized on the holiday season, delivering strong sales growth in key categories and benefiting from increased traffic. However, despite positive momentum in discretionary spending, profitability remains a concern amid rising operational costs. While an earnings beat looks likely, the broader question is whether Target’s near-term challenges will overshadow its recent sales strength, making its stock a cautious consideration before the results.

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Target Corporation (TGT) : Free Stock Analysis Report

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Costco Wholesale Corporation (COST) : Free Stock Analysis Report

Ross Stores, Inc. (ROST) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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