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TheStreet Open House

S&P Reduces Credit Rating For Target (TGT)

NEW YORK (TheStreet) -- S&P reduced its credit rating for Target (TGT) to A from A+ Friday.

Shares of Target close up 0.4% at $59.98.

The reduced credit rating is due to the company's weak fourth quarter. In the fourth quarter the retailer posted earnings of 79 cents a share and revenue of $21.45 billion while analysts surveyed by Thomson Reuters expected revenue of 90 cents a share and revenue of $21.52 billion.

Despite the reduced credit rating S&P has a "stable" outlook for Target.

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TheStreet Ratings team rates TARGET CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TARGET CORP (TGT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.85, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.2%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • TARGET CORP's earnings per share declined by 44.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TARGET CORP reported lower earnings of $3.07 versus $4.53 in the prior year. This year, the market expects an improvement in earnings ($4.05 versus $3.07).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Multiline Retail industry. The net income has significantly decreased by 45.9% when compared to the same quarter one year ago, falling from $961.00 million to $520.00 million.
  • The share price of TARGET CORP has not done very well: it is down 12.88% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
  • You can view the full analysis from the report here: TGT Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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