Target Stock Retreats After Weak Report

Key Insights

• Target is under pressure in premarket trading after missing analyst estimates. 
• Lowe’s stock is gaining some ground despite weak growth expectations. 
• S&P 500 futures are down by almost 1% in premarket trading as traders focus on rising yields. 

Yesterday, strong reports from Walmart and Home Depot provided some support to S&P 500. Today’s reports from Target and Lowe’s  will not have the same impact as traders will likely remain focused on rising yields.

Target Misses Analyst Estimates

Target reported revenue of $26.04 billion and adjusted earnings of $0.39 per share, missing analyst estimates on both earnings and revenue.

Comparable sales increased by 2.6%, reflecting the 2.7% traffic growth. Target noted that its operating margin rate was just 1.2% due to higher freight and transportation costs, as well as the company’s efforts to reduce inventory.

In the fiscal 2022, the company exports to report full-year revenue growth in the low- to mid-single digits. Operating margin rate is expected to be close to the 6% level in the second half of the year.

Traders did not like the report, and the stock is down by about 3% in premarket trading. The stock performed well in recent weeks, so the weak report may trigger a sell-off due to profit-taking.

Lowe’s Expects No Comparable Sales Growth In 2022

Lowe’s reported revenue of $27.48 billion and GAAP earnings of $4.67 per share, missing analyst estimates on revenue and beating them on earnings.

Comparable sales declined by 0.3%. Lowe’s noted that DIY sales were impacted by the shortened spring and lower demand in certain discretionary categories.

In the full-year 2022, the company expects to report comparable sales in a range from a decline of -1% to an increase of 1%. Interestingly, traders look ready to buy Lowe’s shares despite weak growth, and the stock is up by 1% in premarket trading.

It should be noted that retailers’ earnings should not have a major impact on S&P 500 dynamics today. Traders are focused on rising government bond yields, which present a threat to the stock market rally.

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