What To Do With Dollar Tree Stock Following Q3 Results

Alan Rifkin of BTIG recommends investors Buy shares of Dollar Tree, Inc. DLTR after better margins led the discount retailer to post strong third-quarter results and raise its earnings guidance for the fourth quarter.

Following are the key highlights of Dollar Tree’s third-quarter print:

• Operating EPS of $0.81 beat consensus view of $0.78 and BTIG estimate of $0.79.
• Revenues rose 1.1 percent to $5.00 billion versus BTIG estimate of $5.09 billion.
• Comps: 1.7 percent, lower than BTIG estimate of 2 percent.
• Gross margin rose 209 bp versus BTIG estimate of 199 bp.
• Q4 EPS guidance raised to $1.24–$1.33 from $1.21–$1.30.
• 4Q comps seen up low-single-digits versus BTIG’s 2.0 percent estimate.
• 2016 operating EPS of $3.76–$3.85 (includes $0.09 tax benefit; excludes $0.09 debt refinancing charge.)
• 2016 comps projected up low-single-digits.
• 2016 revenue view cut to $20.67 billion–$20.77 billion from $20.69 billion–$20.87 billion.

“We expect the shares to be strong today on the heels of increased EPS guidance and strong 3Q comp. Maintain Buy,” Alan Rifkin wrote in a note.

At last check, shares of Dollar Tree climbed 10.57 percent to $90.66. The analyst has a price target of $98.