NEW YORK (TheStreet) -- Shares of Target (TGT) were surging by 9.01% to $77.88 in early morning trading on Wednesday, after the discount store reported higher-than-expected earnings and revenue for the 2016 third quarter before today's opening bell.
Target reported earnings of $1.04 per share for the quarter, topping estimates for 83 cents per share. Revenue came in at $16.44 billion, beating expectations for $16.3 billion. For the same quarter in 2015, Target earned 86 cents per share on revenue of $17.61 billion.
While the quarterly results were better than expected, they weren't up year-over-year, noted Telsey Advisory Group retail analyst Joe Feldman on BloombergTV's "Bloomberg Daybreak: Americas" on Wednesday morning. The firm has an "outperform" rating and $82 price target on the stock.
"I mean it's somewhat a sigh of relief that things were actually better than what was feared," he said. "But directionally, trends definitely improved. Traffic was down by 1% which is not great, but last quarter it was down 2%."
Target's signature categories, including baby, kids, home, apparel, as well as wellness products have been its focus for about the past 18 months, and these performed better than the company as a whole, Feldman pointed out. "So where they've been focusing, they've seen good trends and I think that that is a good thing that we continue to see that. So we're happy with that."
Target also revised its expectations for its 2016 fourth quarter comparable sales to between -1% and 1% vs. previous expectations of -2% to flat.
"I think it's because profitability has been better," Feldman claimed. "Their product mix is better. The signature categories, which are selling at above the company average rate, tend to be higher margin so you're getting good trends there. And then they're executing well on the expense side. They really are controlling expenses. So very good results from our perspective. We're happy to see it."
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
TheStreet Ratings team rates Target as a Buy with a ratings score of B. This is driven by multiple strengths, which the team believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks the team covers.
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