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Target Could Sustain Its Growth Momentum in Q3 2018

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Analysts’ expectations

Target (TGT) is scheduled to announce its third-quarter results on November 20. Analysts expect Target to maintain its sales and earnings growth momentum in the third quarter. Target reported strong comps growth in the first half of 2018. During the last reported quarter, the comps rose 6.5%, which is the highest growth in the past 13 years. Meanwhile, Target’s bottom line grew at a double-digit rate in the first two quarters.

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During the third quarter, analysts expect the company to report even better numbers. Target’s top line is expected to benefit from expanded digital fulfillment options, the addition of new and exclusive brands, store remodeling, and an increase in the number of small-format stores. Meanwhile, Target’s bottom line is projected to continue to grow at a double-digit rate—higher than 20% growth in the second quarter due to strong comps and the lower effective tax rate.

Besides Target, analysts expect Walmart (WMT) also to report healthy sales growth due to its digital initiatives. However, Walmart’s earnings are expected to remain pressured and record low-single-digit growth. Costco (COST) is expected to maintain its industry-leading comps growth in the coming quarters.

Target stock outperformed broader markets

So far, Target shares have outperformed the broader markets in 2018 due to its strong financial performance and thriving e-commerce business. Target stock has risen 31.0% on a YTD (year-to-date) basis as of November 12.

In comparison, Costco and Walmart stocks have risen 26.0% and 5.2% on a YTD basis. The benchmark index (SPX) has risen 2.0% during the same period.

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