On Target for Growth

NEW YORK (TheStreet) -- Today the investment community is doing what Jim Cramer calls "schnitzeling" when it comes to Target (TGT), a company I've written about in recent months. "Schnitzeling," loosely translated, means buying some shares in anticipation of some inevitable news -- in this case TGT's earnings release Wednesday.

The thesis here could be titled, "Anything Wal-Mart ( WMT) Can Do, I Can Do Better."

TGT's last reporting quarter showed a trailing 12-month (TTM) operating margin of 7.3% and a profit margin of 4.2%. WMT in its last quarter had TTM operating margin of 5.93% and a profit margin of 3.62 %. Both TGT and WMT have nearly the same dividend yield, and the return on equity (TTM) "score" was WMT, 22.42% versus TGT's 19.10%.

It's been fun to watch, listen and learn from the conference calls and earnings reports of these two titans of big-box-store merchandising. Both companies have remarkable leadership and enviable track records including a share-holder friendly attitude.

TGT's one-year price movement including the $1.20 uptick earlier Tuesday is relatively impressive, especially when you look back at its trailing 12-month revenue-per-share history, as you'll see on the chart below.

TGT Chart TGT data by YCharts

After Home Depot's ( HD) blow-out earnings report before the market opened Tuesday followed by its nearly 6% price-per-share pop, optimism is running high for Target's earnings results.

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Can TGT meet or beat analysts' estimates for last quarter? The answer to that question is a multi-million-dollar reaction waiting to unfold Wednesday. When it comes to earnings per share, analysts estimate the increase will be a realistic 3.5%, which is higher than the estimate for the quarter we're currently in. TGT's management will give forward guidance that investors will be eager to hear.

Sales growth (revenue) is expected to have moved 6.5% higher to almost $22.7 billion for the quarter. The company has been guiding lower concerning the last quarter of 2012 with shoppers still dangling from the "fiscal cliff" at that point.

Comments from Federal Reserve Chief Ben Bernanke earlier Tuesday, where he boldly claimed that the benefits of Fed asset purchases currently outweigh the costs and risks, gave the market an injection of supercharged hope. In the current economic environment and with the global challenges mixed in, it is realistic to say the Fed will keep its generous monetary policies firmly in place.

That said, this past quarter was a challenging one for companies like WMT and TGT. TGT's policy of meeting or beating its competitors' prices and even the pricing of online competitors like Amazon.com ( AMZN) may have helped TGT's sales volume but hurt its profit margin.

AMZN has been doing what it does best, and it has undercut WMT and TGT on many items. TGT's promise of "Expect More, Pay Less" helped it protect much of its existing customer base. But did it help it to gain new customers or loosen the purse-strings of all of them?

In fairness again to my comparison with its biggest competitor, WMT, I want to show you its one-year price chart and TTM revenue-per-share line as well.

WMT Chart WMT data by YCharts

If TGT's quarterly revenue report looks similar to WMT's (as seen in the chart above), its share price may hold or even rally higher. Don't let Tuesday's market action on TGT be your only guide on where the price of the shares will be by Friday.

Prudent investors will be listening carefully before the markets open on Wednesday and digesting the many metrics that TGT will divulge. The results may be opportunistic.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust -- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

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