• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Great Expectations? Not for Dollar Tree

I'm apt to sit this one out on the long side or even consider puts below $80.
By TIMOTHY COLLINS
Mar 04, 2020 | 12:13 PM EST
Stocks quotes in this article: DLTR

Someone needs to catch Dollar Tree (DLTR) management up to the present. In its earnings release on Wednesday morning before the opening bell, the company discussed the additional impacts tariffs would have on its Q1 FY 2020. They added the current financial projections do not include any potential impact from COVID-19. Tariff discussions feel so 2019 at this point.

There's a positive and negative to draw from this. The positive is that the tariff issue could be resolved, providing a potential boost to Dollar Tree, or tariffs could be suspended if the virus outbreak worsens. The negative aspect of that latter part is Dollar Tree isn't accounting for any negative impact of COVID-19. If tariffs are temporarily suspended for that reason, there's a good chance the company's benefit from the lack of tariff impact will be offset by the negative impact of COVID-19. While I don't view their guidance as aggressive in any way, they may have been better served to go more conservative here and do a bit of a kitchen sink dump.

Next year should bring about renovations of 1250 Family Dollar stores which is much-needed after that part of the company posted a sale store sales decline of .8% versus the Dollar Tree stores increasing 1.4%. Overall, sales for Q4 were $6.32 billion, up 1.8% year-over-year, but slightly short of consensus. Earnings of $1.79 came in near the very top end of the estimated range and four pennies above Wall Street's expectations.

While Dollar Tree found a way to make the bottom line work despite tepid growth on the top line, the same doesn't hold for Q1 FY2020 or the full year for that matter. Revenue for Q1 will be a smidge below expectations, but EPS guidance is $1.00 to $1.09 versus estimates of $1.20. For the full-year, EPS should land between $4.80 and $5.15 versus $5.29. That's a midpoint which is $0.315 below estimates with about half of that miss expected to come in Q1. That doesn't paint great expectations for a second half, although my guess is the remainder of that miss would occur in Q2, and a bit in Q3.

During FY2019, the company repurchased $200 million in shares. It still has $800 million authorized under its current buyback plan which equals approximately 4% of the current market cap, but I thought it worth noting the overall share count used for diluted EPS calculations barely budged year-over-year despite the buyback.

The $81 level for the stock appears to be of huge importance this week. A close under $81, although I'd be more inclined to use $80, creates a huge head and shoulders potential plus places bulls under support going back two years. We saw it hold in June 2018, then again in the fall and winter of 2018, before shares gained 50% during 2019. Now, Dollar Tree has given back the entire move and threatens to test the $65 to $70 area. One might think the company could do well stocking up on hand sanitizer and toilet paper, but that won't move the needle on $24 billion in sales.

I'm apt to sit this one out on the long side or even consider puts below $80. After the recent downturn, there's many superior risk-rewards out there for your hard-earned dollar.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Timothy Collins had no position in the securities mentioned.

TAGS: Earnings | Investing | Options | Stocks | Technical Analysis | Trading | Retail | Stock of the Day

More from Investing

Price Targets: How They Mislead and How They Can be Used

James "Rev Shark" DePorre
Jan 23, 2021 10:00 AM EST

The main problem with price targets is that they are a static number in a dynamic situation.

Stock Market Continues to Defy Conventional Wisdom

James "Rev Shark" DePorre
Jan 22, 2021 5:04 PM EST

Concerns about the action being overheated remain, but rotational action keeps the momentum going.

AMC Is a High Risk, High Reward Play

Timothy Collins
Jan 22, 2021 2:15 PM EST

Short and sweet: This is based on the high running emotions of the markets. There's little to it beyond that.

GoodRx Needs a Shot in the Arm to Improve Its Outlook

Bruce Kamich
Jan 22, 2021 2:03 PM EST

IPOs in recent months have done extremely well -- not so GDRX.

2021 and 2022 Look Difficult for Intel, While 2023 -- Might -- Be Better

Eric Jhonsa
Jan 22, 2021 1:44 PM EST

Competition from AMD and ARM CPU developers looks set to take a toll over the next two years. But Intel could be in better shape in 2023 if its new CEO is ready to make some tough choices.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    I discuss price targets in my Saturday column.
  • 07:54 AM EST GARY BERMAN

    Friday Morning Fibocall for 1/22/2021

    SPX (Long-Term View) The 1/21/21 NEW high @ 3861...
  • 11:16 AM EST CHRIS VERSACE

    Worst Stocks to Buy for the Biden Presidency

    Biden's take on the minimum wage, likely moves on ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login