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Earnings preview: Target Corp.

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Earnings preview: Target Corp.

Target Corporation (NYSE:TGT) is scheduled to report its second quarter earnings before the market open on Wednesday. All eyes will be on the retailer as up until this point a slew of retail names have reported dismal quarters. Wall Street expects Target to earn $0.98 a share, according to analyst consensus estimates. These predictions represent a drop of 7.5% from last year when the company earned $1.06 a share. Target sees second quarter adjusted EPS of $1.09 to $1.19 and GAAP EPS of $0.90 to $1.00.

Over the last few month analysts have openly criticized the quarter citing higher consumer expenses and economic turbulence. The average earnings estimate has fallen by $0.08 over this period as the street accounted for these difficulties. Revenues are expected to rise 3.1% to $17.30 billion from $16.78 billion in the second quarter of last year.

Target’s earnings beat analysts expectations twice in the past four quarters and missed them in the last two quarters. With difficult economic landscape, some think Target may follow in the footsteps of its largest competitor Walmart. Last week the nation’s largest retailer reported dismal guidance on the back of an inflationary environment. Higher fuel prices pinched the pocketbooks of the target market.

With U.S. growth stalling, management has actively targeted other geographic segments for growth. So far this year the company has focused its attention on building up its presence in Canada. Target opened its first 24 stores in the country with strong success. They generated sales of $86 million in the first quarter with a gross margin rate of 38.4%. With gross margins just above 30% in the U.S., and declining, this much needed segment should help the company’s bottom line in the second quarter. For the traders out there, keep you eye on the 200 day moving average at $68.54. An earnings miss could send shares under this key level and it could remain difficult for shares to break above the average.

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