When a company experiences a fairly damaging data breach, as was the case of Target (NYSE:TGT) back in December 2013, its very hard to regain the confidence of both consumers and shareholders. That being said, a better-than-expected quarter may be the first step in regaining such confidence.
In this article, I not only wanted to highlight Target's recent quarterly performance but also note several reasons why I'm staying bullish on shares of this particular retailer.
Recent Performance And Trend Behavior
On Tuesday, shares of TGT, which currently possess a market cap of $35.67 billion, a forward P/E ratio of 13.47 and a dividend yield of 3.04% (1.72), settled at a price of $56.51/share. Based on a closing price of $56.51/share, shares of TGT are trading 0.64% above their 20-day simple moving average, 4.53% below their 50-day simple moving average and 12.19% below their 200-day simple moving average.
It should be noted that these numbers indicate a short-term uptrend and long-term downtrend for the stock, which generally translates into a moderate buying mode for both near-term traders and somewhat of a selling mode for long-term investors.
Although these numbers indicate somewhat of a selling mode for long-term investors, I strongly believe we could see the company's 50-day and 200-day simple moving averages improve in the wake of its stellar Q4 performance in which the company surpassed EPS estimates by a margin of $0.48/share and revenue estimates by an a margin of $60 million.
A Look At Target's Q4 Earnings
On Wednesday February 26, Target reported results for a very solid fourth quarter. Analysts had been expecting the company to earn $0.82/share on revenue of $21.46 billion. However TGT impressed both investors and analysts when the company reported earnings of $1.30/share on revenue of $21.52 billion.
Contributing to the company's stellar Q4 results were better-than-expected sales in the first half of Q4 (driven mainly by the company's guest-focused holiday merchandising and marketing initiatives) as well as the fact Target returned $272 million to its shareholders in the form of dividends.
If the company's earnings continue to surpass estimates over the next 6-12 months, there's a very good chance the amount of cash returned to its shareholders per quarter could surpass the $300 million milestone by the end of 2014.
2014 Earnings Guidance To Include Target's Canadian Segment
According to the company's earnings-related press release, "Fiscal 2014 will be Target's first full year of operating stores in Canada. As a result, beginning with first quarter 2014, the company will no longer exclude Canadian Segment results from Adjusted EPS. In first quarter 2014, the Company expects Adjusted EPS of 60 cents to 75 cents, reflecting operating results in our U.S. and Canadian Segments. This measure excludes approximately (2) cents related to the expected reduction of the beneficial interest asset, as well as any net expenses related to the data breach. For full-year 2014, Target expects Adjusted EPS of $3.85 to $4.15, reflecting operating results in our U.S. and Canadian Segments. This measure excludes approximately (7) cents related to the expected reduction of the beneficial interest asset, as well as any net expenses related to the data breach."
I strongly believe that if Target can demonstrate better-than-expected growth in both its US and Canadian segments, and implement the necessary measures to avoid another data breach, there's a very good chance the company could meet and/or exceed the estimated range of its FY 2014 operating results.
For those of you who may be considering a position in Target, there are a number of things I'd keep a close eye on over the next several months.
For starters, I recommend keeping a close eye on the company's 2014 EPS performance as it will be the first year both US and Canadian operations are integrated in its financial reporting. Secondly, I'd keep a closer eye on the company's dividend behavior as a steady year-over-year increase in the company's cash flows could result in at least one dividend increase over the next 12-24 months. Lastly, I'd pay very close attention to the continued efforts by Target's management to ensure both its consumers and shareholders that a data breach of this magnitude could never occur again.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TGT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.