Target is gearing up to report its second-quarter earnings on Wednesday, August 21st. Investors are looking to see if the retailer can follow in the footsteps of its omnichannel peer, Walmart, which surpassed expectations for both its top and bottom line in its recent quarterly report. Notably, Walmart’s stock has seen a significant surge since the release of its strong Q2 results, rising by 7% and soaring 40% year-to-date, outperforming Target’s 2% growth.
Analysts are eager to see if a similar post-earnings rally could be in store for Target. The company is projected to report a 2% increase in Q2 sales, reaching $25.23 billion, demonstrating its continued progress in addressing inventory challenges like shrinkage. More importantly, earnings are anticipated to reach $2.18 per share, representing a 21% jump from the $1.80 earned in the same period last year. Target has a track record of exceeding earnings expectations, doing so in three of the last four quarters. However, it did miss Q1 EPS expectations in May, reporting $2.03 per share versus the Zacks Consensus of $2.05.
Looking ahead, Zacks estimates predict that Target’s total sales will remain relatively flat in its current fiscal year 2025 but are expected to rise by 3% in fiscal year 2026, reaching $110.68 billion. On the bottom line, annual earnings are projected to increase by 3% in fiscal year 2025 and are forecast to jump another 12% in fiscal year 2026, reaching $10.39 per share.
Target’s stock currently trades at a forward earnings multiple of 15.7X, a significant discount compared to Walmart’s 30.1X and the S&P 500’s 23.4X. Furthermore, TGT trades well below its decade-long high of 30.4X forward earnings and is slightly discounted compared to the median of 16.3X during this period.
Given Target’s valuation and favorable growth trajectory, its stock could potentially experience a post-earnings rally if the company manages to meet or exceed its Q2 expectations. However, delivering strong quarterly results and positive guidance will be crucial for driving further upside in TGT. For now, Target’s stock holds a Zacks Rank #3 (Hold) rating.
