Kohl's Corporation (NYSE: KSS ) stock fell by more than 3 percent on Tuesday despite the company reporting second-quarter earnings and revenue beats and raising its full-year guidance. Traders appear to simply be taking profits off the table after KSS stock gained more than 110 percent in the past year, and analysts still see Kohl's as one of the most attractive long-term bets in a difficult U.S. retail space.

Kohl's reported second-quarter adjusted earnings per share of $1.76 on revenue of $4.57 billion. Analysts had been expecting EPS of $1.24 and revenue of $4.26 billion. Revenue was up 4 percent compared to a year ago.

[See: 10 of the Best S&P Dividend Stocks in the First Half .]

Same-store sales in the second quarter were up 3.1 percent, ahead of consensus analyst estimates of 2.7 percent.

Kohl's reported gross margin of 39.5 percent, up 0.4 percent. The company said margins have been rising thanks to renewed efforts to reduce excess inventory and focus on selling products at full price.

"We are pleased to report that our sales momentum continued in the second quarter, resulting in a comparable sales increase of 3.1 percent, our fourth consecutive quarter of positive comparable sales," CEO Michelle Gass said in a statement. "We saw strength across the business – both our store and digital channels, all regions of the country, and our proprietary and national brands."

Gass said men's and women's apparel were the two strongest-performing segments in the second quarter, followed by shoes.

Looking ahead, Kohl's once again raised its full-year adjusted EPS guidance from a previous range of between $4.86 and $5.31 to a new range of between $4.96 and $5.36.

Earnings season has been volatile for retail stocks as the industry struggles to adapt to new online competition from Amazon.com ( AMZN ) and others. Bank of America analyst Lorraine Hutchinson says the difficult retail environment means long-term investors need to be extremely picky.

"Remaining selective is key, and we prefer KSS for its robust free cash flow," Hutchinson says.

[See: 7 Retail Stocks to Bag Big Dividends .]

She says the most important component for retail investors this earnings season is guidance, and Kohl's has now raised its guidance for the second consecutive quarter.

"Recent changes, including new management, new brands and Amazon partnerships, boost our confidence that its double-digit free cash flow yield is sustainable," Hutchinson says.

Bank of America has a "buy" rating and $84 price target for KSS stock .

Compare Offers

Compare Offers