On Tuesday, Citi reiterated its Neutral rating for Dollar Tree (NASDAQ:DLTR) shares while maintaining the $120.00 price target for the company's shares. The firm's analysis anticipates a second-quarter earnings per share (EPS) of $1.03, which is slightly below the consensus estimate of $1.06.
Dollar Tree's comparable store sales are expected to grow by 1.6%, a fraction under the consensus of 1.7%. Specifically, Dollar Tree's own comps are projected to rise by 3.0%, outperforming the consensus of 2.8%, while Family Dollar's are predicted to remain flat, aligning with the consensus of a 0.1% increase.
Citi has revised its second-quarter gross margin forecast for Dollar Tree from 30.8% down to 30.2%. This adjustment is attributed to the belief that freight costs will not provide as much of a benefit as management previously anticipated, considering the recent fluctuations in the freight market.
As a result, the firm anticipates that management will maintain their fiscal year 2024 comparable sales guidance at a low-single-digit to mid-single-digit increase.
Furthermore, Citi predicts that Dollar Tree will adjust its fiscal year 2024 EPS guidance downwards to between $6.30 and $6.80, from the previous range of $6.50 to $7.00. This anticipated revision is due to the expectation that management will adopt a more cautious stance on second-half margins in light of potential increases in promotional activity and freight-related challenges.
Attention will also be directed towards any new information regarding the strategic review of Family Dollar and insights into consumer health. Dollar Tree's performance will be closely watched, especially in comparison to its competitors, such as Dollar General (NYSE:DG), which is scheduled to report earnings on August 29, and Walmart (NYSE:WMT).
In other recent news, Dollar Tree, Inc. (NASDAQ:DLTR) has been the focus of several significant developments. The company recently granted performance-based restricted stock units to Lawrence Gatta Jr., the Chief Merchandising Officer for Family Dollar, as part of its 2021 Omnibus Incentive Plan. The vesting of these units is contingent upon the achievement of specific performance objectives related to the strategic review of the Family Dollar business segment.
In terms of financial performance, Dollar Tree reported a consolidated net sales increase of 4.2% to $7.6 billion in its first quarter. The company's full-year adjusted earnings per share is projected to be in the range of $6.50 to $7. However, several financial firms have adjusted their outlook on Dollar Tree shares, with UBS reducing its price target to $155 and BofA Securities reducing its target to $117.
The company's shareholders have re-elected all director nominees to the board for one-year terms and approved the compensation of Dollar Tree's named executive officers. However, a proposal for the Board to adopt a policy requiring an independent Chairman did not pass. The company also ratified the appointment of KPMG LLP as its independent registered public accounting firm for fiscal year 2024.
Lastly, KeyBanc adjusted its outlook on Dollar Tree shares, reducing the stock price target to $145 while maintaining an Overweight rating. This adjustment comes in the wake of the company's announcement regarding strategic alternatives for its Family Dollar segment. Meanwhile, BofA Securities reduced the price target to $117, citing concerns over the financial implications of Dollar Tree's ongoing transition to a multi-price point strategy.
InvestingPro Insights
As Dollar Tree navigates its financial landscape, recent data from InvestingPro provides a snapshot of the company's current valuation and performance metrics. With a market capitalization of $20.75 billion, Dollar Tree's adjusted P/E ratio stands at 19.43 for the last twelve months as of Q1 2023, reflecting investor expectations for future earnings growth. This is supported by one of the InvestingPro Tips indicating that net income is expected to grow this year. Moreover, the company's revenue growth of 7.51% over the last twelve months demonstrates its ability to expand amidst challenging market conditions.
Another InvestingPro Tip worth noting is that Dollar Tree's management has been actively buying back shares, a move that often signals confidence in the company's future prospects and can be appealing to investors looking for companies with proactive capital allocation strategies. It is also reassuring to see that the company's cash flows can sufficiently cover interest payments and that its liquid assets exceed short-term obligations, providing a cushion for operational flexibility.
While the company does not pay a dividend, which might be a consideration for income-focused investors, the stock has been trading near its 52-week low, potentially offering an entry point for value investors, as highlighted by another InvestingPro Tip. For those interested in exploring further, there are additional InvestingPro Tips available, providing deeper insights into Dollar Tree's financial health and market performance.
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