Market Overview

Earnings Previews: Dollar Tree and TJX Companies

Discount retailers Dollar Tree (NASDAQ: DLTR) and TJX Companies (NYSE: TJX) are scheduled to share their fourth-quarter and full fiscal year results Wednesday morning before the opening bell.

Retailers that cater to lower and middle income customers benefitted from belt tightening during the recession. But in its quarterly report last week, retail giant Walmart (NYSE: WMT) cited rising gas prices, delayed income tax refunds and higher payroll taxes as headwinds.

Dollar Tree

Analysts on average predict that this discount variety store operator will report that its revenue rose more than 14 percent year-over-year to $2.23 billion. And quarterly earnings of $0.99 per share are also expected.

That compares to a profit of $0.80 per share in the same period of last year. But note that analysts have underestimated Dollar Tree's EPS in each of the past eight quarters. The earnings beat in the third quarter was by about four percent.

For the full year, analysts expect to see earnings of $2.50 per share, which would be up from $2.02 per share in the previous year. That consensus estimate, like the quarterly one, is unchanged in the past 60 days. And the consensus forecast also has revenue up more than 11 percent from last year to $7.37 billion.

The company operates more than 4,600 stores in the United States and Canada under banners such as Dollar Tree, Deal$ and Dollar Bills. This S&P 500 component has a market capitalization of more than $9 billion, was founded in 1986 and is headquartered in Chesapeake, Virginia. Macon F. Brock Jr. is chairman, and Bob Sasser is president and chief executive officer.

During the three months that ended in January, Dollar Tree bumped ONEOK (NYSE: OKE) from the number 302 spot on the S&P 500 and it announced the expansion of a distribution center in Oklahoma.

The long-term EPS growth forecast is more than 17 percent, and the forward earnings multiple is less than the industry average price-to-earnings (P/E) ratio. Dollar Tree's return on equity is more than 38 percent and the operating margin is greater than the industry average. The analysts' mean price target, or where they expect the stock to go, represents about 14 percent potential upside. That target is well less than the 52-week high from last summer.

Shares have traded mostly between $38 and $42 since October, but the share price is up about five percent year to date. Over the past six months, the stock has underperformed competitors Dollar General (NYSE: DG) and Family Dollar (NYSE: FDO).

TJX Companies

The consensus forecast of analysts surveyed by Thomson/First Call calls for fiscal fourth-quarter EPS of $0.81 on revenue of $7.65 billion. That would be up from $0.62 per share and $6.71 billion in sales in the year-ago period. Note that the consensus EPS estimate has risen in the past 60 days from $0.76, and TJX's earnings have not fallen short of consensus estimates in the past six quarters.

The fiscal year 2013 forecast calls for earnings of $2.54 per share, which would be up more than 21 percent from the previous year. That consensus estimate has increased from $2.49 in the past 60 days. And analysts on average expect to see revenue of $25.78 billion, which would be more than 11 percent higher than a year ago.

This off-price apparel and home fashions retailer operates more than 2,800 stores in the United States, Canada and Europe under such banners as T.J. Maxx, T.K. Maxx, Marshalls and HomeSense. It is also an S&P 500 component and has a market cap near $32 billion. It was founded in 1956 and is now based in Framingham, Massachusetts. Carol M. Meyrowitz is the chief executive officer.

During the three months that ended in January, TJX acquired online retailer Sierra Trading Post, saw strong same-sales in December and bumped Analog Devices (NASDAQ: ADI) from the number 197 spot on the S&P 500.

The long-term EPS growth forecast is more than 12 percent, but the P/E ratio is higher than the industry average. The operating margin is a bit less than the industry average, but the return on equity is more than 53 percent. The mean price target is more than 10 percent higher than the current share price. That target would be a new multiyear high.

Shares have traded mostly between $42 and $46 since last June. Still, the share is still up about 23 percent from a year ago. The stock has outperformed competitor Ross Stores (NYSE: ROST), but underperformed the broader markets, over the past six months.

Posted-In: analog devices dollar general Dollar Tree family dollar ONEOK Ross Stores TJX Companies WalmartEarnings News Guidance Previews Trading Ideas Best of Benzinga

 

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