Will Family Dollar (FDO) Q4 Earnings Disappoint Investors?

Zacks Equity Research

Tue, Oct 7, 2014, 8:40 AM

Family Dollar Stores Inc. (FDO), the operator of self-service retail discount store chains, is slated to report its fourth-quarter fiscal 2014 results on Oct 9. Last quarter, it posted a negative surprise of 5.6%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

Family Dollar has been in troubled waters for some time now. Soft economic recovery and heightened competition from other big brick and mortar retailers as well as online giants have affected sales and profitability. Moreover, increase in the sale of low margin consumables and soft sales of discretionary products are likely to keep margins muted in the quarter to be reported. Family Dollar may also focus on Dollar Tree’s buyout offer, and why it rejected Dollar General’s proposal.

Earnings Whispers

Our proven model does not conclusively show that Family Dollar is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: Family Dollar has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 77 cents.

Zacks Rank: Family Dollar has a Zacks Rank #2 (Buy) but we need to have a positive ESP to be confident about an earnings surprise. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements:

Abercrombie & Fitch Co. (ANF) has an Earnings ESP of +5.63% and a Zacks Rank #2.

Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +1.30% and a Zacks Rank #2.

The Home Depot, Inc. (HD) has an Earnings ESP of +0.89% and a Zacks Rank #2.

Read the Full Research Report on FDO
Read the Full Research Report on CMG
Read the Full Research Report on HD
Read the Full Research Report on ANF

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Will Family Dollar (FDO) Q4 Earnings Disappoint Investors?

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