Target (TGT) shares rose early on Thursday after the company posted better than expected earnings, and then issued guidance that briefly threw the Street for a loop.
Some reports say guidance is well above expectations, some say it’s below, and the divergence seems to hinge on whether the company’s costs to build out stores in Canada are a continuing core expense or a one-time item.
Target posted $1.45 in EPS, a decline from last year but 5 cents ahead of analysts’ expectations. Gross margin slipped to 28.4% from 28.7% as Target got caught up in the promotional surge over the holiday season.
Full-year guidance of $4.55 to $4.75 is well ahead of analysts’ expectations for $4.27. But unadjusted earnings, which include costs to build out the company’s stores in Canada, should come in at $4.05 to $4.25, which would constitute a miss.
“Since Canada will be an ongoing operating the last time checked, shouldn�t investor/Street attention be more focused on the unadjusted earnings (which were below consensus)?” asked Brian Sozzi, chief equity analyst at NBG Productions.
For now the Street seems to disagree. After briefly trading in negative territory, Target is now about 2% higher.
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