Retail

What to Expect From Dollar Tree Earnings

Chris Lange

Published: February 29, 2016 12:05 pm

Last Updated: January 13, 2020 12:34 pm

Dollar Tree Inc. (NASDAQ: DLTR) is scheduled to report its fiscal fourth-quarter financial results before the markets open on Tuesday. The consensus estimates from Thomson Reuters call for $1.07 in earnings per share (EPS) on $5.41 billion in revenue. In the same period of last year, the company said it had EPS of $1.16 and $2.48 billion in revenue.

A tier lower than Costco on the income food chain, Dollar Tree has more potential for growth than Costco because of its acquisition of Family Dollar. It has the same benefits as Costco in terms of more people chasing better spending habits, but a look at its earnings statement shows that it hasn’t fully digested Family Dollar yet. If Dollar Tree can streamline operations and cut down on administrative costs in the coming year, earnings can really fly high. The main thing to watch out for are its debt service costs as a result of the acquisition. Some 50% of the company’s debt though is protected against rising interest rates, which means its floating debt to market cap is only 23%.

Looking back to this past fall, this bargain retailer was hit hard, and at this point, investors might be thinking that could be construed as a compelling entry point. Dollar Tree is a leading operator of single-price point dollar stores under the Dollar Tree banner, along with multi-price points under the Deal$ banner, with over 5,000 locations in the United States and Canada.

A few analysts weighed in on Dollar Tree:

• Buckingham Research has a Buy rating with a $96 price target.
• Morgan Stanley has an Equal Weight rating and raised its price target to $90 from $65.
• Telsey Advisory Group has an Outperform rating and raised its price target to $95 from $80.
• Cantor Fitzgerald reiterated a Buy rating.

So far in 2016, Dollar Tree has outperformed the broad markets, with the stock up nearly 6% year to date. Over the past 52 weeks. the stock is up only about 3%.

Shares of Dollar Tree were trading at $81.53 on Monday, with a consensus analyst price target of $85.46 and a 52-week trading range of $60.31 to $84.22.