Family Dollar Stores To Report 1Q11 Earnings On 1/5

Goldman Sachs has published a research report on Family Dollar Stores FDO in anticipation of the company's 1Q11 earnings report on January 5. In the report, Goldman Sachs writes "We expect management to deliver 1Q EPS at or above guidance, as tailwinds from 2010 initiatives should be enough to support +MSD SSS until benefits from remodels kick in. However, We see risk as likely to the downside given two factor: 1) Lofty Valuation: Shares are currently trading at 15.8X NTM EPS, well above 3-yr averages of 14X, and at the high end of its historical trading range. With the stock currently pricing in further beats and raises, a solid quarter is unlikely to drive shares meaningfully higher. 2) Peer Reactions: Recent dollar store reports have shown that stocks have stopped going up on good news and have been unduly penalized on any sign of comp weakness. DLTR underperformed the S&P by 3% on their 3Q EPS report despite above consensus 8.7% SSS, and upside EPS surprise of over 10%. DG reported 3Q EPS $0.04 ahead of expectations, but the stock underperformed by 7% as SSS of 4.2% were 80 bps light of consensus 5%." Goldman Sachs maintains its Neutral rating and $46 price target. Family Dollar Stores, Inc. closed yesterday at $50.28.