Market Overview

Dollar Tree Shares Downgraded At MKM Following 'Tough' Q2

Related DLTR
Benzinga's Top Initiations
The Market In 5 Minutes: Stumpf Leaves Wells Fargo, More Trump Allegations
Patience With KB Home - Cramer's Lightning Round (10/26/16) (Seeking Alpha)

Dollar Tree, Inc. (NASDAQ: DLTR) reported disappointing Q2 results, with the weakest SSS since 4Q13. MKM Partners’ Patrick McKeever downgraded the rating on the company from Buy to Neutral, while reducing the price target from $104 to $80.

Dollar Tree’s constant-currency comps rose 1.2 percent, versus the MKM estimate of 2.0 percent and the Street's expectation of 2.4 percent. This represented a m/m slowdown, amid a challenging consumer environment. Dollar Tree exhibited “less resiliency” than it had done in the past, analyst McKeever commented.

Despite the top-line miss, EPS came in at $0.72, with consolidated gross margin of 30.3 percent, the analyst pointed out.

Weak Performance By Family Dollar

Comps at Family Dollar Stores, Inc. (NYSE: FDO) turned negative after three positive quarters, with an estimated decline of 1 percent, “even as FDO cycled what we believe was a very easy comparison as the company grappled with management and employee turnover in the weeks prior to the acquisition (closed on 7/6/15, two months into fiscal 2Q15),” McKeever noted.

Estimates Tweaked

The Q3 comp estimate for Dollar Tree has been reduced from an increase of 2.5 percent to 1.5 percent. Family Dollar is expected to be flat, versus the prior estimate of a 2.0 percent increase.

The EPS estimate for Q3 has been raised from $0.77 to $0.79 to reflect “an anticipated $0.09 lift from a one-time tax benefit,” McKeever mentioned. The EPS estimate for FY16 has been raised from $3.72 to $3.74.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for DLTR

Oct 2016KeyBancInitiates Coverage OnSector Weight
Oct 2016Deutsche BankMaintainsBuy
Oct 2016Cleveland ResearchDowngradesBuyNeutral

View More Analyst Ratings for DLTR
View the Latest Analyst Ratings

Posted-In: MKM Partners Patrick McKeeverAnalyst Color Downgrades Price Target Analyst Ratings


Related Articles (DLTR + FDO)

View Comments and Join the Discussion!