Family Dollar Outlook To Be Important Catalyst

Family Dollar FDO is set to report earnings on Wednesday, September 29. Deutsche Bank believes the outlook will be the more important catalyst while Deutsche Bank is comfortable with both the consensus 4Q10 and 2011 sales and EPS estimates. Comps have already been reported at +6.1%, at the mid-point of guidance. Consensus EPS estimates of $0.51 are at the upper end of the $0.46-$0.51 guidance range and its estimate is $0.50, but now believe this is achievable on favorable margin trends. DB believes the consensus forecast embeds 4% comps for 1Q11 and 3% for the year, as well as 15% EPS growth next year. Guidance is expected to be in line with these ranges, which is viewed as conservative and leaving room for upside. FDO has beaten original guidance by about 20% on average in each of the last 2 years. Investors should also expect an acceleration in store growth, with the model showing 300 new locations next year versus 200 this year. Risks include weaker consumer spending and competitive prices. FDO closed Friday at $43.40