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Family Dollar Stores Inc (FDO): Earnings, an Early Look

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Family Dollar logoSpring is finally here, and a new earnings season is right around the corner. On Wednesday, Family Dollar Stores, Inc. (NYSE:FDO) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed, knee-jerk reaction to news that turns out to be exactly the wrong move.

The deep-discount industry has seen huge growth in recent years, as a sluggish economic recovery has left millions of Americans behind, struggling to make ends meet. Yet highly competitive conditions in the industry have left Family Dollar fighting with a number of peers for market share. Let’s take an early look at what’s been happening with Family Dollar over the past quarter and what we’re likely to see in its quarterly report on Wednesday.

Stats on Family Dollar

Analyst EPS Estimate $1.23
Change From Year-Ago EPS 7%
Revenue Estimate $2.89 billion
Change From Year-Ago Revenue 17.6%
Earnings Beats in Past 4 Quarters 1

Source: Yahoo! Finance.

Is Family Dollar’s stock its best bargain?
Analysts have gotten more pessimistic about Family Dollar’s earnings in recent months, as they’ve cut their estimates on the just-ended quarter by $0.04 per share and notched $0.09 off full-year fiscal 2013 earnings-per-share figures. The stock has reflected that dour view, dropping 6% since the beginning of the year.

After years of strength, Family Dollar has recently found itself on shakier ground. The same slow economic conditions that led to its strong performance during the 2008 recession continue to exist today, but now, even deep-discount retailers have proven vulnerable to tough times among its customers.

In particular, a combination of rising payroll taxes, higher prices at the pump, and weak employment growth has held spending back among lower-income shoppers. Wal-Mart Stores, Inc. (NYSE:WMT)‘s tepid 1% rise in same-store sales in the U.S. might have been good news for Family Dollar in years past, but Family Dollar’s move toward more food items has put margins under pressure, and the stock hasn’t responded favorably.

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