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Target: Analysts’ Earnings Projections

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Sustain double-digit growth

Target’s (TGT) bottom line has grown in 2018 and marked double-digit growth in the past two quarters. Analysts expect the company to sustain the double-digit growth in its EPS during the second half of 2018, which is an encouraging sign.

The company’s bottom line is gaining from a significant decline in the tax rate. During the last reported quarter, Target’s effective tax rate was about ten percentage points lower than the same quarter in 2017. Lower interest expenses and share repurchases continue to support the EPS growth rate.

Target’s management expects its EPS to stabilize in fiscal 2018. Management expects solid growth during the second half of the fiscal year. Target’s adjusted EPS is expected to be $1.00–$1.20 in the third fiscal quarter. The midpoint of the guidance range implies ~20% growth on a YoY basis.

Notably, the company’s peers are also benefiting from US tax reforms. Walmart (WMT) and Costco (COST) reported double-digit growth in their bottom line.

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Growth rate to decelerate in fiscal 2019

Analysts expect Target’s fiscal 2018 EPS to grow 14.7%. However, analysts expect the growth rate to decelerate significantly in fiscal 2019. Analysts expect Target to report an adjusted EPS of 5.63 in fiscal 2019—up 4.3% on a YoY basis.

Continued pressure on margins due to higher fulfillment costs and tough YoY comparisons will likely remain a drag.

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