Dollar Tree, Inc. (NASDAQ:DLTR) Just Reported Earnings, And Analysts Cut Their Target Price

Simply Wall St ·  Jun 8 22:09

Last week, you might have seen that Dollar Tree, Inc. (NASDAQ:DLTR) released its quarterly result to the market. The early response was not positive, with shares down 5.6% to US$111 in the past week. It looks like the results were a bit of a negative overall. While revenues of US$7.6b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 3.7% to hit US$1.38 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Dollar Tree after the latest results.

NasdaqGS:DLTR Earnings and Revenue Growth June 8th 2024

Following last week's earnings report, Dollar Tree's 24 analysts are forecasting 2025 revenues to be US$31.3b, approximately in line with the last 12 months. Earnings are expected to improve, with Dollar Tree forecast to report a statutory profit of US$6.72 per share. Before this earnings report, the analysts had been forecasting revenues of US$31.4b and earnings per share (EPS) of US$6.95 in 2025. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

It might be a surprise to learn that the consensus price target fell 5.8% to US$140, with the analysts clearly linking lower forecast earnings to the performance of the stock price. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Dollar Tree, with the most bullish analyst valuing it at US$170 and the most bearish at US$115 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Dollar Tree shareholders.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Dollar Tree's revenue growth is expected to slow, with the forecast 1.5% annualised growth rate until the end of 2025 being well below the historical 5.9% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.7% per year. Factoring in the forecast slowdown in growth, it seems obvious that Dollar Tree is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Dollar Tree. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on Dollar Tree. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Dollar Tree going out to 2027, and you can see them free on our platform here..

It might also be worth considering whether Dollar Tree's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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