NEW YORK (TheStreet) -- Shares of Family Dollar Stores, Inc. (FDO) are lower by 0.89% to $78.15 in late afternoon trading Wednesday, after the discount retailed postponed the scheduled shareholder vote on its $8.5 billion deal to be bought by Dollar Tree Inc. (DLTR - Get Report) until December 23, the Wall Street Journal reports.
The discount retailer initially planned to hold a special meeting for the vote on December 11, but has put it on hold as it awaits an update from U.S. antitrust regulators on the number of divestitures the agency will require from Dollar Tree for the merger, the Journal added.
Dollar Tree has said it would be willing to divest as many stores as possible to get the deal done, the Journal noted.
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Charlotte, NC-based Family Dollar operates a chain of more than 7,900 general merchandise retail discount stores in 46 states.
Also, Dollar General Corp. (DG - Get Report) may divest more than 4,000 stores in order to gain the Federal Trade Commission's approval for its acquisition of Family Dollar, sources told the New York Post.
Separately, TheStreet Ratings team rates FAMILY DOLLAR STORES as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate FAMILY DOLLAR STORES (FDO) a BUY. This is driven by several positive factors, 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, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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.
- Net operating cash flow has increased to $216.16 million or 47.42% when compared to the same quarter last year. In addition, FAMILY DOLLAR STORES has also vastly surpassed the industry average cash flow growth rate of -8.14%.
- The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.26 is very weak and demonstrates a lack of ability to pay short-term obligations.
- FAMILY DOLLAR STORES has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, FAMILY DOLLAR STORES reported lower earnings of $2.49 versus $3.83 in the prior year. This year, the market expects an improvement in earnings ($3.19 versus $2.49).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: FDO Ratings Report