Earnings to Watch Next Week: Zoom, Target, Dollar Tree and Costco in Focus

Earnings Calendar For The Week Of March 1

Monday (March 1)

IN THE SPOTLIGHT: ZOOM

Zoom Video Communications Inc is expected to report a profit of $0.79 per share in the fourth quarter, which represents year-over-year growth of over 425% from $0.15 per share seen in the same quarter a year ago.

The company, which provides videotelephony and online chat services through a cloud-based peer-to-peer software platform, would post year-over-year revenue growth of over 330% to $811.77 million.

“As work-from-home (WFH) persists and Zoom (ZM) Phone gains traction, ZM appears to set up for a strong FQ4 print. More than FQ4/FQ1 report/guide, investor focus/reaction likely based on whether co guides full FY22. Would view the full-year guide as a pos NT catalyst given cautious investor sentiment, however, remain Equal-weight given 2H comps,” noted Meta A Marshall, an equity analyst at Morgan Stanley.

Zoom has established its position as the newly emerged leader in video conferencing, now a growth market, largely credible to the company itself given an introduction of a solution that employees actually use. The company has a meaningful competitive moat built on more than just architecture, but a rapid uptick in video usage has attracted significant investment efforts from competitors. Position within customers makes an attractive opportunity to expand into the broader UC market. Early wins encouraging. Environment post-COVID-19 and large-scale WFH, and timing to reach, less certain.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 1

Ticker Company EPS Forecast
BNZL Bunzl £71.65
FMX Fomento Economico Mexicano Sab $14.49
XRAY Dentsply International $0.64
PRGO Perrigo $1.01
TGNA Tegna $1.13
AXSM Axsome Therapeutics Inc -$0.75
EVTC Evertec $0.55
THRM Gentherm $0.65
BZLFY Bunzl plc $0.13
NRG NRG Energy $0.45
MIDD Middleby $1.40
AY Atlantica Yield $0.23
ZM Zoom Video Communications $0.79
NVAX Novavax -$1.78
TTEC TeleTech $0.71
AMRC Ameresco $0.29
IPAR Inter Parfums $0.30
NSTG NanoString Technologies -$0.50
AI Arlington Asset Investment -$0.19
CCXI ChemoCentryx -$0.33
CYRX Cryoport Inc -$0.05
SGMS Scientific Games -$0.44
DDD 3D Systems $0.09
SRPT Sarepta Therapeutics -$1.80
NGHC National General $0.73
SRNE Sorrento Therape -$0.23
JD JD.com $0.22
AIV Apartment $0.01
PKX Posco $1.52
BKRKY Bank Rakyat $0.13
OSH Oak Street Health -$0.25
YALA Yalla $0.12
KHOLY Koc Holdings AS $0.55
DM Dominion Midstream Partners -$0.06
CXO Concho Resources $1.18
MNTA Momenta Pharmaceuticals -$0.50
PE Parsley Energy $0.25
BEAT BioTelemetry $0.48

 

Tuesday (March 2)

IN THE SPOTLIGHT: TARGET

The eighth-largest retailer in the United States is expected to report a profit of $2.55 per share in the fourth quarter, which represents year-over-year growth of over 50% from $1.69 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of 60%.

The Minneapolis, Minnesota-based company would post year-over-year revenue growth of over 17% to $27.419 billion.

“We maintain our 4Q20 EPS estimate of $2.55 on comps +17.2%, in line with holiday sales, but could see upside on stimulus benefit in Jan. We model FY21 EPS of $8.96, +2% above Street. TGT’s ability to comp the comp will be the headline topic at its Investor Day, and management could conservatively guide FY21 comps and EPS to -LSD to -MSD,” said Oliver Chen, equity analyst at Cowen and Company.

“Fundamentally, we do believe TGT’s momentum is well-positioned to continue as consumers invest in home, appreciate TGT’s private brands, and take advantage of a myriad of convenient and innovative shopping modalities including Drive-Up; furthermore, the backdrop of stimulus payments and a high savings rate are strong positives.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 2

Ticker Company EPS Forecast
SYDB Sydbank A/S kr3.14
CRDA Croda International £84.78
TW Taylor Wimpey £17.00
WEIR Weir Group £43.79
TPK Travis Perkins £43.60
ROR Rotork £6.25
TGT Target $2.55
AZO AutoZone $12.80
KSS Kohl’s $0.99
AER AerCap $0.94
AMRS Amyris -$0.12
SE Spectra Energy -$0.55
DAR Darling Ingredients $0.38
QTRX Quanterix -$0.33
VEEV Veeva Systems $0.68
ROST Ross Stores $1.00
HPE Hewlett Packard $0.41
JWN Nordstrom $0.13
AMBA Ambarella $0.08
GO Grocery Outlet Holding Corp $0.23
URBN Urban Outfitters $0.28
BOX BOX $0.17
ALLK Allakos -$0.85
AHT Ashtead Group £0.29
EDEN Edenred €0.65
ITRK Intertek Group £83.44
IGT International Game Technology $0.04
EMG Man Group £0.07
MSNFY Minera Frisco ADR $0.03
AVAV AeroVironment $0.01
TGTX TG Therapeutics -$0.57

 

Wednesday (March 3)

IN THE SPOTLIGHT: DOLLAR TREE

Chesapeake, Virginia-based discount variety stores that sells items for $1 or less is expected to report a profit of $2.12 per share in the fiscal fourth quarter, which represents year-over-year growth of over 18% from $1.79 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 14%.

The Fortune 500 company, which operates 15,115 stores throughout the 48 contiguous U.S. states and Canada, would post year-over-year revenue growth of over 7% to $6,774 million.

Dollar Tree’s namesake banner has a long history of strong performance, enabled by its differentiated value proposition, but its Family Dollar unit has struggled to generate top-line and margin growth since it was acquired in 2015. We suspect the Dollar Tree banner is better-positioned long-term, but do not believe the aggregated firm benefits from a durable competitive edge, as competitive pressure in a fast-changing retail environment amid minimal switching costs limits results. We expect the COVID-19 pandemic’s effects to be confined to the near term, leaving the long-term competitive dynamic intact,” said Zain Akbari, equity analyst at Morningstar.

“We expect comparable sales gains in the mid-single digits for the Dollar Tree banner and high-single-digits for Family Dollar in the fourth quarter, as rising infection rates led customers to stock up with a focus on essentials and value. Cost leverage should drive the quarter’s operating margin higher by nearly 100 basis points (to 10%) versus the same period in fiscal 2019. We expect sales to normalize in 2021as vaccines gradually contain the pandemic.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 3

Ticker Company EPS Forecast
DLTR Dollar Tree $2.12
WEN Wendy’s $0.18
TAC TransAlta USA -$0.07
PDCO Patterson Companies $0.51
DY Dycom Industries $0.04
MRVL Marvell Technology $0.29
SNOW Intrawest Resorts -$0.17
SPLK Splunk $0.03
AEO American Eagle Outfitters $0.36
SQM Sociedad Quimica Y Minera De Chile $0.22
TCOM Trip.com Group Ltd $0.28
YEXT Yext Inc. -$0.08
MTLS Materialise $0.01
CPB Campbell Soup $0.83
NAV Navistar International -$0.02
VNET 21Vianet $0.05
ABM ABM Industries $0.58

 

Thursday (March 4)

IN THE SPOTLIGHT: COSTCO WHOLESALE

The largest wholesale club operator in the U.S. is expected to report a profit of $2.44 in the fiscal second quarter, which represents year-over-year growth of over 16% from $2.10 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of 8.8%.

COST’s results have consistently been among the best in Retail. Over the past decade, COST has delivered 6% comps and 10% EBIT growth on average. It is rare to find a business with COST’s solid comp/membership growth, while relative e-commerce insulation differentiates its value proposition from other retailers,” said Simeon Gutman, equity analyst at Morgan Stanley.

“We are Overweight even as the stock trades at an elevated valuation given COST’s scarcity value, safety, and scale. In the near-term, we expect incremental sales uplifts from COVID-19 disruption, and earnings power looks stronger despite COVID-19 expenses.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 4

Ticker Company EPS Forecast
KR Kroger $0.69
TTC Toro $0.74
BJ BJs Wholesale Club Holdings Inc $0.67
BZUN Buzzi Unicem RSP $3.55
BURL Burlington Stores $2.11
CIEN Ciena $0.45
MIK Michaels Companies $1.41
JAMF Jamf $0.01
AVGO Avago Technologies $6.56
MDLA Medallia, Inc. -$0.01
GWRE Guidewire Software -$0.01
COO Cooper Companies $2.77
GPS Gap $0.19
COST Costco Wholesale $2.44
GOL Gol Linhas Aereas Inteligentes -$0.41
ALXO Alx Oncology Holdings Inc. -$0.36
AUOTY AU Optronics $0.31
TOELY Tokyo Electron Ltd PK $0.80
FIZZ National Beverage $0.33
CMD Cantel Medical Corp $0.49
PHI Philippine Long Distance Telephone $0.63
MBT Mobile TeleSystems OJSC $17.30
CNQ Canadian Natural Resource USA $0.10

 

Friday (March 5)

Ticker Company EPS Forecast
BIG Big Lots $2.50

 

Target Corp Sales Surge Over 17% in Holiday Season; Target Price $211

The eighth-largest retailer in the United States Target Corp said comparable sales in holiday period grew more than 17%, driven largely by a 4.3% increase in traffic and a 12.3% increase in average ticket.

The retail corporation said its store-originated comparable sales grew over 4%, while comparable digital sales doubled.

Target Corp shares closed about 2% higher at $199.10 on Tuesday; the stock rose 40% in 2020.

“Shares of Target have increased and outperformed the industry in the past six months. The company has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide seamless hopping experience. Markedly, the company has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail and scape,” noted analysts at ZACKS Research.

“Target’s impressive third-quarter fiscal 2020 performance is the testimony of the same, wherein both the top and the bottom lines grew year-over-year. Notably, comparable sales rose for the 14th straight quarter, gaining from strength in the digital channel as consumers shift to online shopping amid coronavirus-led social distancing. Target witnessed sturdy market-share gains in all five core merchandise categories”

Target Corp Stock Price Forecast

Nineteen analysts who offered stock ratings for Target Corp in the last three months forecast the average price in 12 months at $194.83 with a high forecast of $211.00 and a low forecast of $175.00. The average price target represents a -2.14% decrease from the last price of $199.10. From those 19 analysts, 14 rated “Buy”, five rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $180 with a high of $225 under a bull scenario and $125 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the mass-market retail company’s stock.

Several other analysts have also recently commented on the stock. Credit Suisse raised the target price to $211 from $192. Goldman Sachs upped the target price to $212 from $194. Target had its target price increased by Raymond James to $200 from $180. They currently have a strong-buy rating on the retailer’s stock.

In addition, MKM Partners upgraded shares of Target from a sell rating to a neutral rating and increased their price target for the stock to $156 from $127. Telsey Advisory Group reaffirmed an outperform rating and set a $175 target price. At last, Jefferies Financial Group started coverage and set target price at $180.00.

Analyst Comments

“Target Corp (TGT) has firmly established itself as a winner in Retail and deserves a premium multiple vs. historical valuations. Although the business is delivering strong results, we believe the stock price already reflects high expectations,” said Simeon Gutman, equity analyst at Morgan Stanley.

“We see a positive risk/reward skew but think results will moderate and the stock path may be uneven, keeping us Equal-weight.”

Upside and Downside Risks

Risks to Upside: 1) A sustained pickup in comps. 2) Less gross margin pressure/more expense leverage than anticipated. 3) Step up in buybacks boosts EPS growth. 4) A new real estate monetization strategy– highlighted by Morgan Stanley.

Risks to Downside: 1) Comps moderate as TGT laps tough compares. 2) Disappointing GM trajectory due to greater than anticipated headwinds from the digital mix shift, negative category mix shift, and markdowns. 3) High expense growth due to wage inflation.

Three Retailers Trading At All-Time Highs

Wall Street analysts expect a strong 2020 holiday season despite the pandemic, with e-commerce sales continuing their torrid growth pace. Many brick and mortar retailers should outperform as well because well-constructed online sales portal will add to modest in-store purchases. However, storefronts without a strong internet presence are likely to flounder, with the growing infection rate keeping many customers out of virus-ridden closed ventilation systems.

Let’s look at three hybrid retailers hitting all-time highs as we get closer to the holidays and year’s end. These are big cap companies that have adapted well to the age of the Internet, with an expanding customer base utilizing curbside pick-up and package delivery as well as physical shopping trips. Of course, this is the ‘new normal’, with retailers that waited too long to open or expand online sales, like America’s struggling mall anchors, having a tough time paying the bills.

Walmart

Dow component Walmart Inc. (WMT) waited until 2016 to get in the e-commerce game, buying Jet.com for a hefty premium. They’ve now combined that operation into a robust site that’s emerged as the primary competitor to Amazon.com Inc. (AMZN). The company has also launched a membership program to rival Prime, setting the stage for an epoch retail battle. In the meantime, the stock is trading just five points below November’s all-time high while holding onto a 26% year-to-date return.

Target

Target Corp. (TGT) has emerged as 2020’s top retail performer, taking market share from equal-sized and smaller rivals during the first quarter’s pandemic decline. The company blew away Q3 2020 estimates in November, picking up additional market share through strong execution. Same day and drive-up sales exploded during the quarter, growing 200% and 500% year-over-year, respectively. As the company noted, customers have shifted spending from travel into the goods they sell, raising odds for continued strong growth in 2021.

TJX

TJX Companies Inc. (TJX) sells home basics, apparel, and home fashions through T.J. Maxx, Marshalls, Homesense, and Sierra stores. This ‘off-price’ operation provides a less robust online sales portal than Walmart or Target and has no curbside pick-up. However, it executes so well that investors keep buying the stock, which is trading less than one point under an all-time high. Even so, this issue will carry greater downside risk through the winter months due to the surging pandemic.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Target Shares Soar After Blowout Quarterly Earnings

Target Corporation (TGT) soared 12.65% Wednesday after the big-box retailer smashed Wall Street’s quarterly earnings and revenue forecasts. The company reported Q2 adjusted earnings of $3.38 per share, more than double analysts’ estimates of $1.64 a share. The top line grew 86% from a year earlier due to customers continuing to shop close to home during the coronavirus pandemic.

Sales of $22.98 billion topped expectations by 13.54% and grew 25% from the year-ago period as the company benefited from its designation as an essential retailer during U.S. lockdowns that forced some of its smaller rivals to close. “In the current environment, each of our categories is operating very well,”  CEO Brian Cornell said during the earnings call, per MarketWatch. He added that the company picked up $5 billion in market share in the quarter as several competitors filed for bankruptcy and laid off staff.

Through Wednesday’s close, Target stock has a market capitalization of $77.11 billion, offers a 1.99% dividend yield, and trades 25.76% over the past three months as of Aug. 20, 2020. Year to date (YTD), the shares have gained nearly 22%.

Digit Sales Growth

Target’s e-commerce sales registered a 195% increase during the quarter, propelled by more than 700% growth in its curbside pickup service. Meanwhile, the company’s Shipt online delivery service rocketed by 350% year over year (YoY). The retailer also said it added 10 million new digital customers in the first half of the year.

Wall Street View

Most analysts remain bullish as sales continue to show strength in the fragmented retail space. The stock receives 15 ‘Buy’ ratings, 2 ‘Overweight’ ratings, 9 ‘Hold’ ratings, and just 2 ‘Sell’ ratings. Price targets range from as high as $180 to as low as $105, with the median price pegged at $152 – 1.4% below Wednesday’s $154.22 close.

Technical Outlook and Trading Tactics

Target shares catapulted above the psychological $150 level after the company delivered its better-than-expected results. The move was accompanied by the largest volume in twelve months, indicating buyer conviction. Active traders who enter the stock at these levels should consider using a trailing bar stop to book profits. To use this strategy, remain in the position until the price closes beneath the current day’s low or the prior day’s low – whichever is lower. Conservative traders may opt to wait for a retracement to previous resistance at $130, which has now flipped to support.