Dollar Tree (DLTR) Gaisn Despite Earnings Miss

NEW YORK (TheStreet) -- Dollar Tree (DLTR) was gaining 6.2%to $55.92 Wednesday despite missing analysts' estimates for earnings and revenue in the fourth quarter.

The retailer reported earnings of $1.02 a share for the quarter that ended January 2014. That's 4 cents lower than the Capital IQ Consensus Estimate of $1.06 a share. Revenue fell 0.5% from the year-ago quarter to $2.23 billion, missing estimates of $2.29 billion.

Looking to the first-quarter, Dollar Tree expects earnings of between 63 cents a share and 68 cents a share, compared to analysts' estimates of 69 cents a share.

For the full-year 2015, the company expects earnings of between $2.91 and $3.13 a share, compared to estimates of $3.31 a share. The company expects revenue of between $8.35 billion and $8.58 billion for the year, while analysts expect $8.66 billion.

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TheStreet Ratings team rates DOLLAR TREE INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DOLLAR TREE INC (DLTR) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 9.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Multiline Retail industry and the overall market, DOLLAR TREE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 37.59% is the gross profit margin for DOLLAR TREE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.65% is above that of the industry average.
  • Net operating cash flow has significantly increased by 97.61% to $66.40 million when compared to the same quarter last year. In addition, DOLLAR TREE INC has also vastly surpassed the industry average cash flow growth rate of -20.09%.
  • Compared to its closing price of one year ago, DLTR's share price has jumped by 27.87%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: DLTR Ratings Report

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