Thursday, November 19, 2020

Target Hits Bullseye with Strong Q3 Results

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News shaping
the markets today

     

What’s happening: Shares of Target Corp gained on Wednesday after the retailer reported stronger-than-expected results for the third quarter.

What happened: Online shopping gained significant momentum last quarter with customers avoiding visiting physical stores due to the pandemic.

While Target’s digital comp sales grew by a whopping 155%, the retailer also recorded a meaningful spike in curb-side pickups.

How were the results: The retail store giant reported growth in sales and profits for the third quarter, with both top- and bottom-line figures exceeding market views.

  • Revenue grew 21.3% to $22.63 billion, beating market expectations of $20.93 billion.
  • Net income climbed 42% to $1.01 billion.
  • Adjusted earnings surged 105% to $2.79 per share, exceeding the consensus estimate of $1.60 per share.

Why it matters: The retail segment has been severely hurt by the pandemic, which has forced some into bankruptcy. Target, on the other hand, exhibited high resilience through the quarter and reported strong results.

Target is not the only retailer to emerge as a winner amid the pandemic. Rival Walmart also announced outstanding results for the quarter earlier this week.

Target’s performance was boosted by the sales of essential items, such as food, toiletries, and cleaning supplies. The typically large size of the retailer’s stores and its ability to address customer safety needs became its greatest strengths amid the pandemic.

Although customers initially hesitated visiting Target stores, the retail giant adapted quickly to the situation and started offering curb-side pickup facility known as Drive Up. The move worked and Target recorded 500% growth in curb-side sales during the quarter. Target’s home delivery through Shipt also climbed around 280%.

Despite achieving massive success with its recent initiatives, the company has plans to grow its presence even further. Target recently announced plans to open small Ulta Beauty outlets inside its stores to increase foothold for its cosmetics and personal care business.

“Our strong results in 2020 reflect the benefits of our multi-year effort to build a durable and flexible model, with a differentiated assortment and a suite of industry-leading fulfilment options,” CEO Brian Cornell said.

Despite the solid results, management refrained from issuing a forecast for 2021 citing pandemic-related uncertainties. 

How shares responded: Target’s shares climbed 2.3% to settle at $166.85 on Wednesday following the release of quarterly results. The stock has added around 22% over the past three months.

What to watch: With various regions reconsidering lockdown measures, investors will keep an eye on growth in Target’s curb-side sales. Markets are also keen to hear about Target’s initiatives for boosting sales during the all-important holiday season.

The Markets Today

     

Crude oil will be in focus today after recording its highest close since early September.

Context: Oil futures moved higher on Wednesday after a second pharma company announced positive data from late-stage trials of a covid-19 vaccine candidate.

Details: Oil prices were propelled by hopes of a faster recovery in the global economy after Pfizer said that its vaccine candidate, which it is developing with BioNTech, had achieved 95% efficacy in a final analysis of its Phase III trial. The latest announcement came after the companies reported encouraging results on Monday, paving the way for the vaccine’s regulatory approval.

Crude prices maintained their gains despite US crude inventories rising for the second straight week. The EIA (Energy Information Administration) reported an increase of 800,000 barrels during in US crude inventories in the week ending November 13. The rise was much higher than the 100,000-barrel increase expected by analysts. Crude stocks at the Cushing, Oklahoma, hub also increased by 1.2 million barrels last week.

WTI (West Texas Intermediate) crude for December delivery gained 0.9% to close at $41.82 per barrel, after rising as high as $42.46 earlier in the session. January Brent crude rose around 1.4% to settle at $44.34 per barrel on ICE Futures Europe. Prices of both US and Brent crude notched their highest close since early September.

Meanwhile, gasoline supply increased by 2.6 million barrels last week, versus expectations of a 300,000-barrel rise. December gasoline rose 0.8% to close at $1.1629 a gallon on Wednesday.

What to watch: With the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) scheduled to ease output curbs from January 1, traders will keep an eye on the OPEC Conference scheduled for November 30, as well as the OPEC and non-OPEC ministerial meeting on December 1, 2020 to reassess the decision with the continued rise in covid-19 cases around the world.

Other Markets: European trading indices closed higher on Wednesday, with the FTSE 100, German DAX 30 and French 40 up by 0.31%, 0.52% and 0.52%, respectively.

Support & Resistances
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market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Eurozone’s current account and construction output, Italy’s construction output and current account, Spain’s balance of trade, Central Bank of Turkey’s interest rate decision and gross foreign exchange reserves, UK’s CBI industrial trends orders, South Africa’s interest rate decision, Canada’s ADP employment as well as the US Philadelphia Fed manufacturing index, initial jobless claims, existing home sales, EIA’s natural gas stockpiles and Kansas City Fed's manufacturing production index.