Target (NYSE:TGT) has been having a very rough go of it since its disastrous first-quarter earnings report on May 18.
Target reported that fuel and freight costs exceeded expectations by $1 billion in the first quarter, and the company noted that higher wages and excessive inventories also weighed on results.
For the first quarter, sales grew 4% year-over-year (YOY) to $25.2 billion, which beat estimates for $24.49 billion. Sales were driven by strong demand for household essentials, food, beverages and beauty products, as well as increased sales of Target brands with consumers seeking deals. Target noted that the first quarter was the 20th-straight quarter of sales growth.
However, first-quarter adjusted earnings slipped 40.7% year-over-year to $2.19 per share, down from $3.69 per share in the first quarter of 2021. Analysts expected adjusted earnings of $3.06 per share.
Due to the weaker first-quarter results, Target trimmed its full-year operating earnings outlook. It now expects its operating margin this year to be about 6%, down from previous forecasts for 8% or more.
Today, Target shares took another hit after company management revealed that it was lowering its second-quarter guidance. Specifically, Target cut its second-quarter operating margin projections from 5.3% to 2%. For the second half of the year, Target anticipates its operating margin rate to be about 6%. For the full year, the company expects revenue to increase in the low- to mid-single digits.
The company is also planning on “pricing actions to address the impact of unusually high transportation and fuel costs.” In other words, Target will be raising prices in the second quarter to offset the higher costs due to inflation.
Now, following the weaker-than-expected earnings results and subsequent selloff, Target was downgraded to a D-rating in Portfolio Grader. It was briefly upgraded to a C-rating last week, but then downgraded to a D-rating again over the weekend. The reality is Target hasn’t held a B-rating (or been consider a “Buy”) since its earnings report. So, folks following my Portfolio Grader would’ve known not to invest and avoided the stock’s more than 25% fall since May 18.
Of course, Target isn’t the only company that was downgraded to a D-rating over the weekend. Out of the 66 stocks that were upgraded/downgraded this weekend, 12 were downgraded from a C-rating to a D-rating. I’ve listed the first 10 below, but for the full list of stocks and their Quantitative Grade and Fundamental grade, please click here. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and act accordingly.
|Upgraded: From Hold to Buy|
|ATVI||Activision Blizzard Inc.||D|
|BEN||Franklin Resources, Inc.||D|
|COF||Capital One Financial Group||D|
|DLR||Digital Realty Trust, Inc.||D|
|IP||International Paper Company||D|
|JHX||James Hardie Industries PLC||D|
|TAK||Takeda Pharmaceutical Co. Ltd.||D|
If you’re looking for the best stocks to buy, then I encourage you to give my Growth Investor Buy List stocks a look. I recently added eight new energy, fertilizer and commodity-related stocks to the Buy Lists, as they represent the “sweet spot” in the current environment. I also revealed my latest Top Stocks list, which is also dominated by energy and commodity-related companies.
For full details, click here and join me at Growth Investor today!
P.S: Crypto pioneer Charlie Shrem and legendary investor Luke Lango are holding an emergency briefing called Crypto in Crisis on June 14, at 7 p.m. Eastern time. They’ll review the phenomenon that’s been plaguing cryptos recently and how it could spark a new era in crypto and a new wave of millionaires.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Digital Realty Trust, Inc. (DLR), Ubiquiti Inc.(UI)