Dollar Tree Upgraded By Deutsche On Strong Management, Increased Upside Opportunities

"DLTR has a strong management team led by CEO Bob Sasser with an impressive execution record, and until demonstrated otherwise, we think investors will assume steady improvement at Family Dollar ahead," analyst Paul Trussell wrote in a note.

Trussell noted Family Dollar's "three straight quarters of positive comps and an impressive positive margin surprise in 1Q."

The analyst expects an EBIT margin of 6.2 percent for Family Dollar in FY18, as there is potential for Dollar Tree "to exceed guidance for at least $300 million in synergies by the end of year three."

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"We think DLTR can achieve consistent ~3 percent comps over the next few years, and see GPM upside through sourcing, improving DC costs, reducing shrink, and leveraging occupancy costs," Trussell continued.

For the second quarter, the analyst expects Dollar Tree to report EPS of $0.76, above the Street at $0.74 and above guidance of $0.66–$0.72. The analyst projects SSS up 2.7 percent, above the Street at 2.4 percent and in-line with LSD guidance, which will represent Dollar Tree's 34th consecutive quarter of positive SSS.

The analyst also raised his price target to $110 from $82, while shares of Dollar Tree were up 0.73 percent to $96.99 at time of writing.

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