On Wednesday, Evercore ISI adjusted its price target for Dollar Tree (NASDAQ:DLTR), increasing it marginally to $155 from $153, while maintaining an "In Line" rating for the stock. The firm is initiating a positive Tactical Trading Call on Dollar Tree as it approaches its March earnings release.
The analyst at Evercore ISI predicts strong holiday sales for Dollar Tree, with fourth-quarter earnings per share (EPS) expected to meet or exceed Wall Street's forecasts. They also anticipate a constructive guidance that would support the current $7 per share estimate for calendar year 2024 and encourage the $10+ target for 2026, which was previously set in June. The firm expects a mid to high single-digit increase in Dollar Tree's share price, potentially reaching the high $140s to low $150s range, based on 18 to 18.5 times the projected earnings for calendar year 2025.
A key differentiator for Dollar Tree this earnings season could be its ability to improve earnings momentum in calendar year 2024 by addressing underperforming Family Dollar locations, either by closing them or rebranding. Management is expected to showcase confidence in bridging the gap from a $5.75 EPS in calendar year 2023 (excluding the 53rd week) to the Street's $7.00 EPS projection for calendar year 2024. This confidence is bolstered by an anticipated $1.00+ EPS tailwind from freight and transport cost improvements and an Evercore ISI estimated $0.20-$0.40 annualized benefit from store rationalization, excluding one-time headwinds from dead rent.
The analyst further suggests that the share gains for both Dollar Tree and Family Dollar banners in calendar year 2023 are indicative of the completion of necessary reinvestment spending. This could signal an inflection point for margins, especially as wage inflation is expected to moderate. Looking to the long term, Dollar Tree's management remains confident in achieving the $10+ underlying EPS power as projected in their June 2024 investor presentation, which is likely to be emphasized as a significant growth opportunity.
InvestingPro Insights
As Dollar Tree (NASDAQ:DLTR) gears up for its upcoming earnings release, the financial community is keeping a close eye on the company's performance. According to real-time data from InvestingPro, Dollar Tree currently boasts a market capitalization of $30.23 billion, with a Price/Earnings (P/E) ratio of 26.37. This valuation reflects the company's financial standing as of the last twelve months leading up to Q3 2024.
InvestingPro Tips highlight that while net income is expected to drop this year, Dollar Tree's cash flows are robust enough to comfortably cover interest payments, showcasing financial resilience. Additionally, the company's liquid assets exceed its short-term obligations, indicating a strong liquidity position. This is particularly relevant as the company navigates economic headwinds and works towards improving earnings momentum in the upcoming fiscal year.
Investors may also find encouragement in the company's recent performance, with a strong return over the last three months, as indicated by a 19.79% price total return. This positive trend aligns with Evercore ISI's Tactical Trading Call and suggests that the company's stock could be on an upward trajectory as it approaches the March earnings release.
For those looking to delve deeper into Dollar Tree's financial health and future prospects, InvestingPro offers additional insights. Currently, there are six more InvestingPro Tips available for Dollar Tree, which can be accessed through the platform. Readers interested in these valuable insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing their investment analysis tools.
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