Stryker shares tumble despite strong Q2 results and raised guidance
On Wednesday, Telsey analysts maintained a Market Perform rating on Dollar Tree stock (NASDAQ: NASDAQ:DLTR) following the company’s impressive first-quarter results for fiscal year 2025. The firm also reaffirmed its price target of $95.00. The stock, currently trading at $96.72, has shown remarkable momentum with an 8.26% gain in the past week. According to InvestingPro data, 8 analysts have recently revised their earnings estimates upward for the upcoming period.
Dollar Tree reported earnings per share of $1.26, surpassing both Telsey’s estimate of $1.22 and the FactSet consensus of $1.21. The company’s comparable sales grew by 5.4%, exceeding Telsey’s forecast of 4.0% and the FactSet estimate of 3.9%. Operating margin reached 8.4%, slightly above Telsey’s prediction of 8.3% and FactSet’s 8.2%.
The quarter saw a rise in comparable traffic by 2.5% and an increase in average ticket size by 2.8%. Consumables, which make up 50.4% of sales, saw a 6.4% increase in comparable sales, while discretionary items, accounting for 49.6% of sales, rose by 4.6%. Gross margin improved by 13 basis points to 35.6%, attributed to reduced freight and occupancy costs and better markups, though partially offset by higher distribution, shrink, and markdown expenses. The company maintains healthy financials with a market capitalization of $20.33 billion and trades at a P/E ratio of 20x.
Selling, general, and administrative (SG&A) expenses increased by 93 basis points to 27.2%, influenced by higher depreciation, store payroll, general liability claims, and utilities costs. These were somewhat balanced by reduced stock compensation and temporary labor costs, along with the leverage of expenses on strong sales. Overall, Dollar Tree’s earnings before interest and taxes (EBIT) grew by 1.5% to $388 million for the quarter.
In other recent news, Dollar Tree has reported a 5.4% increase in comparable sales for the first quarter, attributed to a rise in customer traffic and transaction size. The company has raised its full-year earnings guidance and anticipates a 5% increase in comparable sales for the upcoming quarter, despite forecasting second-quarter earnings per share below consensus estimates. Analysts from Truist Securities, Wells Fargo (NYSE:WFC), CFRA, and Telsey Advisory Group have all adjusted their price targets for Dollar Tree, with Truist Securities and Wells Fargo setting targets at $100 and $105 respectively, while CFRA and Telsey Advisory Group set theirs at $92 and $95.
Truist Securities maintained a Buy rating, citing strong first-quarter results, while Wells Fargo also expressed confidence with an Overweight rating, highlighting Dollar Tree’s margin resilience and strategic initiatives. CFRA kept a Hold rating, noting tariff challenges but acknowledging the company’s efforts to mitigate impacts. Telsey Advisory Group maintained a Market Perform rating, emphasizing Dollar Tree’s store expansion and strategic focus on customer experience. The company is also advancing its multi-price point strategy and plans to open approximately 400 new stores in 2025, reflecting a unit growth of about 4.5%.
Analysts have noted the potential for Dollar Tree to achieve high single-digit to low double-digit earnings growth, with Wells Fargo projecting normalized earnings in the mid-$6 range by 2026. Despite these positive developments, challenges such as elevated tariff risks and temporary labor costs associated with strategic rollouts remain.
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