Goldman Sachs Reiterates Buy Rating, $77 PT on Family Dollar Stores

In a report published Wednesday, Goldman Sachs Group reiterated its Buy rating and $77.00 price target on Family Dollar Stores

. Goldman Sachs noted, “Given the uncertainty around the effects of the fiscal cliff on the low-income consumer and a more promotional environment heading into the new calendar year, we expect management to offer prudently conservative 2Q13 guidance of $1.33-$1.43, inclusive of a $0.10-$0.11 benefit from the 53rd week. This guidance range would place our 2Q13 EPS estimate of $1.40 and consensus of $1.39 slightly above the midpoint of the range. Despite the more challenging industry backdrop, we continue to expect accelerating double-digit EBITDA and EPS growth throughout FY13 as consumers begin to respond to FDO's sales-driving initiatives. Shares have pulled back more recently and currently trade at 14.3X our 52-week NTM EPS estimate, a 5% discount to the stock's long-term average of 15X. As such, the market appears to already embed a scenario of 3%-4% comps, operating margin contraction in FY13 and modest expansion going forward. With downside more limited on lower expectations and sales initiatives still set to drive fundamental outperformance, we maintain our Buy rating into the print.” Family Dollar Stores closed on Monday at $62.83.