Target's earnings spotlight: What to watch

Target is on the verge of unveiling its Q4 financial performance before markets open tomorrow, with a briefing set for 9am ET. Analysts anticipate a 28% surge in EPS year-over-year to $2.42, alongside a revenue increase of 1.4% to $31.83 billion. The company forecasts its adjusted EPS to fall between $1.90 and $2.60, expecting a moderate decline in comparable sales. This period is pivotal, encompassing the holiday season which significantly contributes to Target's annual revenue.

Previously, Target's shares climbed post-earnings announcement, despite a streak of missing revenue forecasts for three quarters. The company's EPS outlook for the forthcoming quarter was optimistic, marking a change from prior downward revisions. 

Last quarter saw a 4.9% dip in same-store sales, with a sharper 6.0% drop online. Despite a downturn in discretionary spending—electronics being notably weak—there was a slight improvement from the second quarter. The operating margin saw an uplift to 5.2%, up from 3.9% the previous year and 4.8% in the preceding quarter.

The upcoming earnings will shed light on consumer spending trends, with Target showing a mixed record: impressive EPS outperformance against a backdrop of missed revenue targets. After adjusting its EPS forecast to align more closely with actual outcomes, investors are cautiously optimistic about the next quarter's guidance.

Walmart's robust Q4 announcement may have heightened expectations for Target. Walmart's significant EPS and revenue outperformance might signal positive outcomes for Target as well. Since its third-quarter report, Target's stock has been on an upward trajectory, suggesting a more favorable investor outlook. Yet, sustaining this momentum hinges on strong forthcoming results.