Thursday December 12, 2019
Target’s Earnings Hit the Mark
Target reported revenue of $18.67 billion for the third quarter, up 4.7% from $17.59 billion during the same quarter last year. This outshined Wall Street’s expectation of $18.49 billion in revenue.
“The Target team did an excellent job serving our guests and executing our strategy throughout the third quarter,” said Target CEO and Chairman Brian Cornell. “Our third quarter results are further proof of the durability of our strategy, as we're seeing industry-leading strength across multiple metrics, from the top line to the bottom line.”
Target posted net earnings of $714 million, or $1.39 per share for the quarter, beating analysts’ expectations of $1.19. This was up 14.8% from $622 million, or $1.17 per share at this time last year.
Target’s comparable sales increased 4.5% in the quarter. The company has seen comparable sales grow almost 10% in the past two years. The company increased its earnings per share guidance for the full year, based on the strong growth in the first three quarters of the year. The new EPS guidance projects a range of $6.27 to $6.47 per share, up from the previous forecast of $5.90 to $6.20 per share. Target’s shares soared more than 14% after the release of its report.
Target Corporation (TGT) shares ended the week at $127.02, up 11.6% for the week.
Home Depot Decreases Forecast
The Home Depot, Inc. (HD) reported earnings for the third quarter on Tuesday, November 19. The world’s largest home improvement store reported increased revenues and adjusted its fiscal guidance for the rest of the year.
Revenue came in at $27.22 billion for the quarter. This was a 3.5% increase from revenue of $26.30 billion at this time last year, but fell short of the $27.53 billion that analysts predicted.
“Our third quarter results reflected broad-based growth across our business, yet sales were below our expectations driven by the timing of certain benefits associated with our One Home Depot strategic investments,” stated Home Depot CEO and Chairman Craig Menear. “We are largely on track with these investments and have seen positive results, but some of the benefits anticipated for fiscal 2019 will take longer to realize than our initial assumptions.”
Home Depot posted net income of $2.77 billion, or $2.54 per share. This compares to net income of $2.87 billion, or $2.53 per share during the same quarter last year.
The Atlanta-based company reported same-store sales growth of 3.6%, which fell short of analysts’ expectation of 4.7% growth. Home Depot lowered its full-year expectations to sales growth of 1.8%, down from guidance of 2.3% growth. The company also decreased its comparable sales growth guidance to 3.5%, down from 4.0% as previously forecast.
The Home Depot, Inc. (HD) shares ended the week at $218.03, down 8.6% for the week.
TJX Companies Reports Earnings
TJX Companies, Inc. (TJX) reported its third quarter earnings on Tuesday, November 19. The off-price retailer which houses stores like TJ Maxx, Marshalls and Home Goods reported increased revenue and earnings.
The company reported revenue of $10.45 billion for the quarter. This was up 6% from $9.83 billion in revenue posted during last year’s third quarter.
“We are especially pleased that Marmaxx, HomeGoods, and TJX Canada each delivered a sequential increase in their comp store sales growth, and TJX International maintained its strong momentum driven by excellent performance in Europe,” said TJX CEO and President Ernie Herrman. “Further, customer traffic was the primary driver of the comp store sales increases at each of these four major divisions.”
TJX posted quarterly net income of $828.26 million, or $0.68 earnings per share. This was up from $762.25 million in net income, or $0.61 earnings per share at the same time last year.
TJX’s comparable sales increased 4%, over last year’s 7% increase. On November 18, 2019, the company completed an investment of $225 million, which created a 25% ownership interest in a privately held Russian off-price retailer Familia. TJX increased its full-year guidance for the rest of the year, expecting sales to rise between 2% and 3% as the holiday season approaches.
TJX Companies, Inc. (TJX) shares ended the week at $59.18, virtually unchanged for the week.
The Dow started the week at 27,993 and closed at 27,876 on 11/22. The S&P 500 started the week at 3,118 and closed at 3,110. The NASDAQ started the week at 8,529 and closed at 8,520.
Treasury Yields Lower Due to Trade Uncertainty
China’s central bank announced a decrease in its key funding rate, a move that last occurred in October 2015. Economists noted the signal as a stimulus attempt for China’s economy. Many economists are doubtful that a “phase one” trade agreement will be completed by the year’s end.
“Investors are coming round the view that the inertia between the U.S. and China is not going to be solved anytime soon notwithstanding the protestations by U.S. officials that a deal is close,” said Kenneth Broux, a strategist at Societe Generale. “One wonders if US Senate backing for protesters in [Hong Kong] has effectively reduced the chances of a deal to zero.”
The 10-year Treasury note slid to 1.81% on Monday and hit a low of 1.71% on Thursday. The 30-year Treasury bond peaked at 2.17% on Thursday.
“We do have some tricky dynamics that are playing into the market, most of it related to the phase one deal,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities. “The Treasurys market has been hedging with regards to global trade this week, though [Thursday] is a bit more noise. What will be important even if a deal gets delayed is that both sides continue to speak.”
The 10-year Treasury note yield closed at 1.77% on 11/22, while the 30-year Treasury bond yield was 2.22%.
Mortgage Rates Decline
The 30-year fixed rate mortgage rate averaged 3.66%, down from 3.75% last week. At this time last year, the 30-year fixed rate mortgage averaged 4.81%.
This week, the 15-year fixed rate mortgage averaged 3.15%, down from 3.20% last week. Last year at this time, the 15-year fixed rate mortgage averaged 4.24%.
“The housing market continues to steadily gain momentum with rising homebuyer demand and increased construction due to the strong job market, ebullient market sentiment and low mortgage rates,” said Freddie Mac’s Chief Economist Sam Khater. “Residential real estate accounts for one-sixth of the economy, and the improving real estate market will support economic growth heading into next year.”
Based on published national averages, the savings rate was 0.09% on 11/22. The one-year CD finished at 0.05%.