Should Investors Consider the Dollar Tree Stock Rally Post Q4 Earnings?

Dollar Tree (DLTR) has experienced a notable surge in its stock value, rising by 13% since the release of its Q4 earnings report on Wednesday. This increase is largely attributed to investor enthusiasm over the company’s announcement to divest its struggling Family Dollar business.

Dollar Tree’s Q4 Results

In its Q4 report, Dollar Tree disclosed total sales of $4.99 billion, a significant decrease from the $8.63 billion recorded in the same quarter the previous year, and it fell short of analyst expectations of $8.23 billion. CEO Mike Creedon expressed optimism, stating that the sale of Family Dollar would enable the company to focus on long-term growth, enhanced profitability, and better capital returns.

On the earnings front, Dollar Tree reported an EPS of $2.11, which was below the anticipated $2.18 and a decline from the $2.55 earnings per share posted a year ago.

Full-Year Results & Outlook

As the fiscal year comes to a close, Dollar Tree's total sales for FY24 were $27.56 billion, down 10% from $30.6 billion in the prior fiscal year. Likewise, annual earnings fell by 13%, with EPS dropping to $5.10 from $5.89 in FY24.

Looking ahead to Q1, Dollar Tree anticipates sales between $4.5 billion and $4.6 billion, compared to $7.63 billion in the same quarter last year. The Q1 EPS guidance is projected between $1.10 and $1.25, which is lower than the current Zacks Consensus estimate of $1.46, reflecting a potential decline.

For the full fiscal year 2026, Dollar Tree forecasts total sales in the range of $18.5 billion to $19.1 billion and expects EPS between $5.00 and $5.50, both of which are below the Zacks Consensus estimates of $5.94 per share, equating to a 16% growth expectation. However, Zacks anticipates an 11% increase in earnings, reaching $6.62 per share in FY27.

Analyst Upgrades & Price Targets

With hopes that the sale of Family Dollar will result in reduced operating costs, several analysts have been raising their price targets for DLTR stock, including notable firms like Bernstein, Evercore ISI, and Deutsche Bank.

The current Average Zacks Price Target stands at $81.26, suggesting a promising 17% upside for DLTR based on the forecasts from 23 analysts.

Bottom Line

Following a significant rally in the wake of its earnings report, Dollar Tree stock currently holds a Zacks Rank of 3 (Hold). Although the company may see a decline in revenue due to the divestiture of Family Dollar, the reduction in operating costs is expected to enhance overall profitability in the long run, especially with DLTR trading at a reasonable 11.6 times its projected forward earnings multiple.

DollarTree, Earnings, Investors