Deutsche Raises Price Target and Estimates on Dollar Tree (DLTR)

Deutsche Bank is reiterating its Buy rating on shares of Dollar Tree (NASDAQ: DLTR) and is increasing its price target from $81 to $89.

The firm's new price target is based off of its FY13 EPS estimate while its old price target was factored off its its FY12 estimate.

Following market checks and new lateral data points, the firm is increasing its Q4 EPS and comp estimates to 1.57 and 5.5 percent from $1.56 and 5 percent. For FY12 and FY13, Deutsche estimates EPS of $4.85 and $5.55 which the firm feels is conservative.

Given the potential for FCF of $550 million on average in FY12 and FY13, the firm believes management may try to complete its $1.5 billion buyback plan earlier. This maybe one of the key earnings growth drivers as time passes.

An analyst at Deutsche comments, "First, on the IMU front, during DLTR’s 3Q call CEO Bob Sasser noted that “their initial markup is higher than last year, higher than planned . . . “ and “I think this whole year our initial markup trip-to-trip has increased.” As a result, DLTR should enjoy a natural tailwind to GPM throughout 2012. Second, lower costs allow the company to reinvest back into the product, driving higher sales in the process. Third, unlike peers, as a $1 price point model, DLTR has not enjoyed any inflation tailwind in ‘11, which others will begin to cycle next year."

For an analyst ratings summary and ratings history on Dollar Tree click here. For more ratings news on Dollar Tree click here.

Shares of Dollar Tree closed at $82.93 yesterday.

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