Family Dollar Profit, Sales Rise as Consumers Flock to Discount Stores

Discount retail chain Family Dollar Stores ( FDO) reported solid second-quarter earnings Wednesday, also raising its full-year EPS estimates for the second time.

The Charlotte-based company said its fiscal second-quarter profit was $84.1 million, or 60 cents per share, compared with $63.3 million, or 45 cents per share, in the year-ago period. These earnings matched analyst estimates of 60 cents per share.

Sales for the quarter rose 8.7% to $1.99 billion.

Back in March, Family Dollar said that second-quarter same-store sales, considered the key indicator of a retailer's health, rose 6.4%, easily beating estimates for a 3.6% gain.

In a similar fashion to other discount retailers, Family Dollar has benefited from the economic downturn as more and more shoppers seek out discounts on everyday goods. Family Dollar sells items ranging from paper towels to laundry detergent and food products in over 6,600 stores in 44 states.

The company raised its full-year profit forecast for the second time this year, now expecting sales to increase between 5% and 7%, a rise in same-store sales between 3% and 5%, and EPS of $1.90 to $2.00 per share, up from previous estimates of $1.63 to $1.81 per share. On average, analysts expect full-year earnings of $1.91 per share.

Family Dollar also guided above analyst estimates for the fiscal third quarter, now expecting EPS of 54 cents to 58 cents per share, while analysts expect 51 cents per share.

Shares of Family Dollar rose $1.53, or +4.7%, in late morning trading Wednesday.

We have been recommending shares of FDO since Mar. 26, when the stock was trading at $32.10. We like the company's results and would still hold the shares here.

Family Dollar Stores is a "recommended" dividend stock, holding a Dividend.com DARS Rating (our proprietary Dividend Advantage Rating System) of 3.5 out of 5 stars.

Homebuilder Consolidation Begins Pulte Homes ( PHM) and Centex ( CTX) announced today that their respective boards of directors have unanimously approved a definitive merger agreement under which Pulte and Centex will combine in a stock-for-stock transaction valued at $3.1 billion, including $1.8 billion of net debt.

Under the terms of the agreement, Centex shareholders will receive 0.975 shares of Pulte common stock for each share of Centex they own. Based on the closing price of Pulte stock on April 7, 2009, the transaction has a value of $10.50 per Centex share, representing a premium of 32.6% to the 20-day volume weighted-average trading price of Centex's shares.

The homebuilder space is in tough shape right now and may be so for a while. The other names investors should be watching, as far as "better homes in a tough neighborhood" right now, include Toll Brothers ( TOL) and KB Home ( KBH). Both Pulte and Centex had suspended their dividends recently.

Neither of the two companies are currently on our "Recommended" list at this time.

Micron Technology Announces $450 Million Stock/Note Offering

Semiconductor and computer memory maker Micron Technology ( MU) said Tuesday that it will offer $450 million in stock and convertible notes, in an effort to raise cash amid the economic turndown.

Micron expects the stock portion of the offering to net about $250 million. The stock offering will involve about 55.3 million common shares, with an option for an additional 8.3 million shares, and will be based on the stock's April 6 closing price of $4.52 per share.

The company will also offer $200 million worth of convertible senior notes due 2013, with an over-allotment option of an additional $30 million in notes.

According to reports, Micron will use some of the money it raises to fund capped-call transactions, which could help prop up its common stock price after the note offering. The rest of the proceeds will be used as working capital, for capital expenditures and other transactions.

Micron shares were down 18 cents, or -4%, in Wednesday morning trading.

Shares of MU are way off of all-time highs of $88 hit in June of 2000. The stock has technical support near all-time lows of $2 a share. If the stock can stabilize, we see overhead resistance around the $5.00-$6.50 mark. We do not currently rate this non-dividend paying stock, but do follow the name closely.

Micron Technology does not currently pay a dividend.

Mosaic's Third-Quarter Profit Falls 89%; Sales Dip 36%

Fertilizer maker The Mosaic Company ( MOS) reported earnings Tuesday that badly missed analyst sales and profit expectations.

The Plymouth, Minn.-based company said its fiscal third-quarter profit fell 89% to $58.8 million, or 13 cents per share, compared with a profit of $520.8 million, or $1.17 a share, in the year-ago period. Revenue fell to $1.38 billion, from $2.15 billion a year earlier.

On average, Wall Street analysts expected earnings of 24 cents per share on revenue of $1.89 billion.

The company said it expects fourth-quarter earnings to improve over third-quarter levels, but still remain relatively weak in comparison to 2008 levels.

Despite the negative earnings report, Mosaic shares rose $1.19, or +2.77%, in early afternoon trading Wednesday.

We removed shares of MOS from our "Recommended" list back on Aug.4, when the stock traded at $109.29.

The company has a .47% dividend yield, based on last night's closing stock price of $42.94. The company has near-term technical support in the $31-32 price area. If the shares can firm up, overhead resistance would come in at the $48-50 levels. We would remain on the sidelines for now.

The Mosaic Company is not recommended at this time, holding a Dividend.com DARS Rating (our proprietary Dividend Advantage Rating System) of 2.8 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks as well as a detailed explanation of our ratings system.
At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.

Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.