Merrill Upgrades 99 Cents Only and Family Dollar Stores
Merrill upgrades 99 Cents Only Stores (NDN ) to neutral from sell and Family Dollar Stores (FDO ) to buy from neutral.
Analyst Daniel Barry says the stock has been trading in the $14 to $16 range since September despite continued estimate reductions. He believes investors are fully aware of issues facing the company: the financial model appears sound and the problem has been execution.
As retailing stocks usually outperform market in February/March on aggregate, sector, and individual stock basis, he thinks 99 Cents Only Stores could be carried up along with the rising tide.
Barry says there has been a negative psychology toward the dollar store group past year, but his outlook this year is for "steady improvement", especially as the group faces easy sales comparisons in the next four quarters.