Continued Pressure On US Consumers To Hurt Family Dollar Stores’ Prospects (FDO, HD, TGT, WMT)
Even though the management of Family Dollar Stores Inc. (NYSE: FDO) has reiterated its EPS forecast of $0.45 to $050 (1Q10 results on Jan 6), RBC Capital Markets believes that investors are pricing in too steep a recovery for many consumer–related stocks, which have a possibility of getting hurt by issues like prolonged levels of high unemployment; as suggested by the comments from Home Depot (NYSE: HD), Target (NYSE: TGT) and Wal-Mart (NYSE: WMT).
Based on this argument and the fact that although traffic was up during the quarter, transaction size stopped growing, RBC Capital Markets believes other stocks offer better risk/reward profiles than Family Dollar Stores (price target of $30 per share).
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