Family Dollar Stores Inc (NYSE:FDO) is set to report FQ2 2014 earnings before the market opens on Thursday, April 10th. Family Dollar Stores is a discount retailer which now operates over 8,000 stores. Recently Family Dollar announced that they will be adding 400 new food items and slashing prices on nearly 1,000 products. Over the past two years Family Dollar has reported year over year growth in EPS and revenue 6 and 8 times respectively. This quarter both profit and revenue are expected to fall below last year’s numbers as retailers continue to face a challenging period due to the poor weather. Here’s what investors expect from FDO Thursday.
The current Wall Street consensus expectation is for Family Dollar Stores to report 90c EPS and $2.788B revenue while the current Estimize.com consensus from 10 Buy Side and Independent contributing analysts is 92c EPS and $2.783B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Family Dollar Stores to beat the Wall Street consensus on EPS but come up a few million dollars short on revenue.
By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a small difference between the two groups’ expectations.
The distribution of estimates published by analysts on the Estimize.com platform range from 90c to 96c EPS and from $2.710B to $2.804B in revenues. This quarter we’re seeing an average distribution of estimates on EPS for Family Dollar Stores and a larger distribution of estimates on revenue.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.
Over the past 4 months the Wall Street EPS consensus fell from $1.22 to 90c while the Estimize consensus decreased from 93c to 92c. Meanwhile the Wall Street revenue consensus declined from $2.894B to $2.788B while the Estimize forecast also slipped lower from $2.794B to $2.783B. Timeliness is correlated with accuracy and downward analyst revisions at the end of the quarter are often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is Stockflare_COO who projects 93c EPS and $2.798B in revenue. Stockflare_COO is ranked 26th overall among over 4,000 contributing analysts and is ranked 8th so far this season. Over the past 2 years Stockflare_COO has been more accurate than Wall Street in forecasting EPS and revenue 60% and 48% of the time respectively throughout 380 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case Stockflare_COO is making a bullish call expecting Family Dollar Stores to beat the Estimize community’s expectations on both the top and bottom line.
This quarter contributing analysts on the Estimize.com platform are expecting Family Dollar to beat the Street’s projection on the bottom line, but come up $5 million short on revenue. The bigger story this quarter is that an otherwise growing company is expected to face an earnings hiccup. The Estimize community expects EPS to be 24% lower than FQ2 last year and revenue is projected to fall 3.8%.
Get access to estimates for Family Dollar Stores published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize.com. Register for free to create your own estimates and see how you stack up to Wall Street.