Analysts at Sterne Agee raised their estimates and price target for Target Corporation (NYSE:TGT) after the company reported better-than-expected financial results for the third quarter.

Target Corporation's PT, EPS Estimates Raised by Analysts

Analysts impressed by Target’s traffic/SSS improvement

In a note to investors, Sterne Agee analysts Charles Grom and his colleagues emphasized that Target Corporation (NYSE:TGT) was the “true surprise” in their coverage group during the third quarter.

According to the analysts, they were impressed by the traffic/SSS improvement of Target Corporation (NYSE:TGT) in the United States and Canada under its new CEO Brain Cornell.

Grom and his fellow analysts also noted that margin performance of the second largest discount retailer in the United States “improved nicely at both division segments.”

When it comes to the shares of Target Corporation (NYSE:TGT), the analysts maintained their Neutral rating citing the reason that the stock’s rich multiple (~19x their FY15 EPS of $3.85) was the largest obstacle.

Analysts’ price target, EPS estimates

Grom and his fellow analysts raised their price target for the shares of Target Corporation (NYSE:TGT) from $51 to $58 per share based on 15x of their FY15 EPS estimate for the company.

The analysts increased their FY14 EPS estimate for the company to $3.19 per share and FY15 EPS estimate to $3.85 per share.

Target’s 3Q results

Target Corporation (NYSE:TGT) reported $0.54 in adjusted earnings per share , higher than the $0.44 per share expected by Grom and his fellow analysts and the $0.47 per share consensus estimate.

Grom and his colleagues said, “The beat was of high quality—coming entirely at the EBIT level with upside from better revenue (+0.01) gross margins (+0.01), SG&A (+0.06), and D&A (+0.02).”

The analysts also noted that the outperformance from a segment perspective was driven by +0.06 from its U.S. operations and +$0.04 benefit from Canada.  Grom and his colleagues also noted that the 2.7% revenue growth of Target Corporation was better than their 2.2% estimate.

The analysts said, “We commend Target and the new leadership team for delivering better results on both sales and margin.”