Target’s Upcoming Earnings: What Analysts Expect and Historical Trends
Target (NYSE: TGT) is set to announce its fiscal first-quarter earnings on Wednesday, May 21, 2025. Analysts predict earnings of $1.70 per share on $24.4 billion in revenue. This forecast indicates a 16% decline in earnings year-over-year, alongside flat sales compared to last year’s figures of $2.03 per share and $24.5 billion in revenue. History shows that Target’s stock has risen following earnings announcements 50% of the time, with an average one-day increase of 8.0% and a peak increase of 18%.
Challenges Ahead for Target
The retailer faces challenges as it prioritizes lower-margin essential goods. This shift, driven by ongoing inflation, high interest rates, tariff issues, and increased market competition, may affect its financial performance in the upcoming quarter. Despite these hurdles, Target remains operationally robust, boasting a current market capitalization of $44 billion. Over the past twelve months, the company generated $107 billion in revenue, attained $5.6 billion in operating profit, and recorded $4.1 billion in net income.
Trading Strategies and Historical Insights
For traders focusing on events, historical performance can offer valuable insights. This includes positioning ahead of earnings or responding to the aftereffects. For those seeking less volatile options compared to individual stocks, the Trefis High Quality portfolio has outperformed the S&P 500, realizing returns exceeding 91% since its inception.
Image by ElasticComputeFarm from Pixabay
Target’s Historical Odds of Positive Post-Earnings Return
Analyzing one-day (1D) post-earnings returns reveals:
- Over the last five years, there have been 20 recorded earnings data points, resulting in 10 positive and 10 negative one-day returns, indicating a 50% likelihood of positive returns.
- This ratio remains consistent at 50% when examining the last three years instead of five.
- The median of the 10 positive returns is 8.0%, while the median of the 10 negative returns stands at -5.7%.
Correlation Between Historical Returns
Understanding the correlation between short-term and medium-term returns following earnings can be a prudent strategy. This can help identify pairs with the highest correlation, allowing traders to execute informed trades. For instance, if the 1D and 5D returns share a strong correlation, traders might consider taking a ‘long’ position in anticipation of positive returns over the next five days.
Analyzing Correlations in Target’s Earnings Performance
Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
TGT Correlation Between 1D, 5D and 21D Historical Returns
Correlation with Peer Earnings Performance
Peer performance can impact post-earnings stock reactions. Often, the pricing-in may begin prior to the earnings announcements. Historical data provides insight into Target’s stock performance compared to peers that reported earnings just before Target. For a proper comparison, peer stock returns also reflect post-earnings one-day (1D) returns.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
