Despite missing top and bottom-line expectations, Dollar Tree (DLTR) shares have soared +13% since reporting its Q4 results on Wednesday.

The rally comes as investors have applauded Dollar Tree’s announcement to sell its ailing Family Dollar business to Brigade Capital Management and Macellum Capital Management for $1.01 billion.

Dollar Tree’s Q4 Results

Dollar Tree reported Q4 sales of $4.99 billion which dropped from $8.63 billion in the comparative quarter and largely missed estimates of $8.23 billion. Still, CEO Mike Creedon stated the sale of Family Dollar will allow for the dedication of long-term growth, profitability, and returns on capital.  

On the bottom line, Dollar Tree posted Q4 EPS of $2.11 missing expectations of $2.18 and falling from $2.55 per share a year ago.

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Full-Year Results & Outlook

Rounding its operating year for fiscal 2025, Dollar Tree’s total sales fell 10% to $27.56 billion compared to $30.6 billion in FY24. Annual earnings were down 13% to $5.10 per share from EPS of $5.89 in FY24.

Dollar Tree expects Q1 sales in the range of $4.5-$4.6 billion compared to $7.63 billion in the prior year quarter. The company projects Q1 EPS to be between $1.10-$1.25 which came in below the current Zacks Consensus of $1.46 (Current QTR Below) or 2% growth.

Providing full-year guidance for its current FY26, Dollar Tree projects total sales at $18.5-$19.1 billion and EPS of $5.00-$5.50 which also came in below the Zacks Consensus of $5.94 a share or 16% growth. Based on Zacks estimates, Dollar Tree’s annual earnings are forecasted to rise another 11% in FY27 to $6.62 per share.

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Analyst Upgrades & Average Zacks Price Target

With the sale of Family Dollar expected to reduce Dollar Tree’s operating cost, it's noteworthy that many analysts have started to raise their price targets for DLTR including those of Bernstein, Evercore ISI, and Deutsche Bank.   

Notably, the current Average Zacks Price Target of $81.26 suggests 17% upside for DLTR and is based on the short-term price targets offered by 23 analysts.

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Bottom Line

Following a very sharp post-earnings rally, Dollar Tree stock lands a Zacks Rank #3 (Hold). While the company’s revenue will certainly decline following the sale of Family Dollar, lower operating costs should eventually lead to a significant boost in probability, and DLTR trades at a very reasonable 11.6X forward earnings multiple.

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This article originally published on Zacks Investment Research (zacks.com).

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