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Analyst Watch: Target, BJ's Will Avoid Big Box Retail Blues

U.S. stock index futures pointed to a lower open Wednesday in the wake of a strong close for the major averages in the previous session.

Here's what analysts and others are watching before the bell:

Target posted higher quarterly earnings Wednesday morning, helped by sales of more profitable items like clothing and improved profit at its credit card business.

Peter Benedict, retail analyst with Robert W. Baird, has an outperform rating and $64 price target on Target , which remains a top pick for him.

The firm will continue to highlight Target as a balanced idea on improved discretionary spending, he says, and expects company-specific initiatives to support positive comps in the second half of 2010 despite tougher compares.

"We remain encouraged by continued positive traffic and strong comps within higher-margin apparel category," Benedict says. Also, strong credit profitability is expected, he says, while year-over-year revenue declines are expected to
persist, continued downward trend in delinquencies sets the stage for continued release of bad debt provision.

Meanwhile, Benedict is keeping his neutral rating and $48 price target on BJ's Wholesale .

"We expect an in-line quarter from BJ,with below-plan merchandise comps (2.9% vs. 4%-6% guidance) mitigated by lower-than-expected IT expenses," Benedict says.
Traffic, he notes, remains strong and average ticket
pressures should ease in the second half.

"While fundamentals have slowed and shares are no longer 'cheap,' private equity interest should limit downside risk," he says.

See more of what analysts and money managers have to say, and get the latest financial news. Watch Squawk on the Street every weekday morning starting at 9 a.m. ET.


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