Family Dollar Stores, Inc. (FDO) posted better-than-expected second-quarter 2010 results on April 7, 2010, due to robust sales witnessed in the Seasonal and Electronics, Home Products and Consumable categories, boosting investors’ confidence.
Wall Street analysts have now had over a month to digest all the news. Below we cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short-term and long-term outlook for the stock.
Earnings Report Review
Family Dollar’s quarterly earnings of 81 cents a share surpassed the Zacks Consensus Estimate of 78 cents, and jumped 35% from 60 cents in the prior-year quarter. Family Dollar, the operator of self-service retail discount stores posted a 4.9% year-on-year increase in revenues to $2,090.2 million.
Management guided third-quarter 2010 earnings between 71 cents and 76 cents a share, and fiscal 2010 earnings between $2.48 and $2.58.
(Read our full coverage on this earnings report: Family Dollar Earnings Surge)
Earnings Estimate Revisions – Overview
Estimates haven’t budged for Family Dollar since the earnings release. The Zacks Consensus Estimate has not moved up significantly. The reason being that most of the analysts’ estimates were in line with the company’s third and fiscal 2010 guidance, which led to a slender upward movement in the Estimate.
Agreement of Analysts
In the last 30 days, one analyst out of the 23 covering the stock raised the estimate substantially for the upcoming third quarter, while one analyst chopped the estimate for the following quarter. For fiscal 2010 and 2011, three analysts raised their estimates.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for third-quarter 2010 moved upwards by a penny, but is unchanged for the following quarter over the last 30 days. Moreover, the Zacks Consensus estimate for fiscal 2010 is up a cent, while for fiscal 2011 it is up 2 cents.
The estimates in the current Zacks Consensus for third-quarter 2010 range from a low of 71 cents to a high of 81 cents. For fiscal 2010, the estimates range from $2.47 to $2.70.
Family Dollar to Outperform
Family Dollar’s strategic initiatives to improve the merchandising, marketing and store operations have resulted in sustained growth in the top and bottom lines. The effective price management, cost containment, tighter inventory control, private label offering, expanded operating hours and recent merchandise initiatives should drive sales and margin trends. Moreover, in order to enhance the market share, Family Dollar intends to focus on both consumable and discretionary categories.
Family Dollar’s point-of-sale technology and store realignment initiatives better position it to drive traffic, meet customer-oriented demand and improve the in-store shopping experience. The company hinted that comparable-stores sales are on the rise due to improved traffic counts and increase in average transaction value, and remains on track to achieve comps growth of 6% to 8%.
Family Dollar shares are maintaining a Zacks #1 Rank, which translates into a short-term Strong Buy recommendation. Our long-term recommendation for the stock also remains Outperform.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
Read the full analyst report on “FDO”
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