Ahead Of The Bell: Family Dollar Stores Upgraded

NEW YORK (AP) — Credit Suisse upgraded its investment rating on Family Dollar Stores Inc. on Tuesday, saying the discount chain is likely to grow its square footage over the next 5 years and increase profit margins.

The company is a good buy for investors, as the stock price doesn't reflect the benefit of that expansion, said analyst Michael Exstein in a note to investors.

Credit Suisse hiked Family Dollar to "Outperform," its highest rating, from "Neutral."

The chain is likely increasing its private-label brands after improving the quality and packaging of many of its products, said analyst Michael Exstein in a note to investors. He also said that Family Dollar is trying to buy inventory more cheaply. Both initiatives would expand the company's profitability.

Family Dollar is also likely to grow its square footage at a rate of about 3 percent annually for the next three to five years, Exstein added. Meanwhile, he said the stock's price relative to its earnings outlook is cheap historically.

Shares rose 41 cents to $29 in Tuesday premarket trading.

Exstein maintained a $34 price target on the shares.