Target: Earnings Preview

Target (NYSE: TGT  ) will report third-quarter earnings on Thursday. The company has experienced softer sales this year but had mixed results in meeting analyst estimates. Will the third-quarter report look more optimistic? 

Here's what to watch in Target's earnings report. 

Quarter estimates to beat 
Analysts estimate that Target will report revenue of $17.4 billion and earnings per share of $0.67. Target has missed analyst revenue estimates for the past two quarters but beat EPS estimates in all but one of the past five quarters. The company forecast third-quarter EPS in the range of $0.80 to $0.90.

Quarterly results to beat
Target's third-quarter report last year included revenue of $16.9 billion -- a year-over-year increase of more than 3% -- and EPS of $0.90. Comparable-store sales were up 2.9%.  

Comparing Target's third-quarter segment results this year with the year-ago period has a catch via a segment change. Last year's domestic sales were broken into two segments: retail sales and credit card sales. But Target sold off its credit card holdings this past spring, so third-quarter results for this year will exist only under the general heading of U.S. segment.

The change won't make for a major difference since the credit card business played a much smaller role than retail. So it's still worth looking at the retail segment sales for last year, which were up 3.4% to $16.4 billion. 

It's also worth comparing the new earnings data to the previous quarter's performance. Target's second-quarter report included revenue of $17.1 billion and EPS of $0.98.

Canadian expansion on track? 
Target plans to have 126 Canadian stores under operation by year-end. The company had opened 68 locations by the end of the second quarter. 

Right now, the Canadian stores are interesting for the future growth potential since this segment only contributed $275 million in sales to the second-quarter results. But it's important to note whether Target is still opening stores at the rate planned.

Competitor comparison 
Target's place in the market sits closer to Wal-Mart's  (NYSE: WMT  ) bargain-priced supercenters than it does Sears Holdings' (NASDAQ: SHLD  ) faltering Kmart chain. 

Wal-Mart reported third-quarter results last week that included revenue of $114.9 billion and EPS of $1.14. Analysts had predicted revenue of $116 billion and EPS at $1.13. Comps were down 0.3% at U.S. Wal-Mart stores and up 1.1% at Sam's Club stores. The smaller Neighborhood Market stores reported 3.4% comp growth. 

Sears reports its third-quarter the same day as Target. Analysts estimate $8.1 billion in revenue and a $3.39 loss per share. Sears has missed EPS estimates for four of the five past quarters and missed revenue for two quarters in that period.

Foolish final thoughts
Target is more likely to mirror Wal-Mart's third-quarter revenue miss and EPS while Sears Holdings falls short. But having a report date so close to Black Friday means more attention will be focused on the holiday sales -- and the eventual fourth-quarter results -- than a potentially soft third quarter.

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