In this article, let's take a look at the world’s premier measurement company and a technology leader in chemical analysis, life sciences, diagnostics, electronics and communications, Target Corp. (TGT, Financial)
New deal
The company has reached an agreement with Visa (V, Financial) to pay their dealers $67 million to settle the case for hacking retail data in 2013, one of the largest hacking cases in history.
The agreement was confirmed by both firms. Neither company commented on the amount of the payment, but the figure of $67 million was reported by The Wall Street Journal and later confirmed by a source familiar with the agreement.
The deal, which aims to leave behind the 2013 attack suffered by the retailer, which involved the theft of personal data and affected about 40 million customers, "seeks to focus on protecting industry about future concessions with new technologies," Visa said in a statement.
Target is also seeking a similar agreement with MasterCard (MA, Financial), but the latter is not accepted by distributors.
In any case, Target said it was pleased to reach an agreement and that the cost of the arrangement had already been reflected in previous financial results of the company.
Upbeat estimates
The retailer posted better-than-expected earnings for the second quarter. Net earnings doubled to $1.21 per share from $0.61 per share a year ago. Excluding one-time items, earnings were $1.22 per share, higher than analysts' estimates of $1.11 per share, beating by $0.11. Revenue rose to $17.4 billion, up 2.8% and in line with estimates. Further, the company raised the forecasted full-year earnings are in the range between $4.60 and $4.75 per share, up from earlier estimates.
On the other hand, Walmart (WMT, Financial) had reported disappointing results, so it seems that TGT is doing much better than the former, and this trend should continue in the future. Walmart has seen its margin compressed.
Relative valuation
From a valuation standpoint, trading at a 17.06 forward P/E, which stands at a premium compared to the industry mean, indicates that other companies operating in the same sub-industry are less richly valued. Walmart seems to be more attractive from a valuation standpoint: 15.06x forward P/E versus Target's 17.06x.
Hedge funds holdings
I always like to see which hedge funds have long positions in the stock. Ken Griffin´s Citadel Investment Group held 1.83 million shares at the end of the second quarter. The value of the stake amounted to $149.48 million.
Although the stock lost 0.54% in that period, and Griffin has reduced the stake by 59%. Another prominent investor in the stock is Joel Greenblatt (Trades, Portfolio), with 794,652 shares held as of the end of the second quarter of 2015.
Final comment
As a consequence, shares of Target are trading higher this morning. The stock gained 10.59% on a year-to-date basis 41.69% in the past 12 months.
Target is a stock dividend investors should consider, yielding 2.8%. Also, it increased its buybacks allowance from $5 billion to $10 billion and could add value if shares are undervalued.
Disclosure: As of this writing, Omar Venerio did not hold a position in any of the aforementioned stocks
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