Can DLTR maintain its positive EPS surprise streak in 2026?

Dollar Tree's (DLTR) likelihood of maintaining a positive EPS surprise streak in 2026 is moderate, given the various factors influencing its financial performance and market conditions. Here's a detailed analysis:

1. Recent Performance and Adjustments:
   • DLTR's recent earnings report showed an adjusted EPS of $2.29 for the fourth quarter, which beat the analyst estimate of $2.19. This indicates a positive surprise, but it's important to note that revenue fell short of estimates, coming in at $5 billion versus the consensus estimate of $8.24 billion.
   • The company's guidance for FY 2026 EPS is set at $5.00-$5.50, which suggests a potential for growth but also indicates a range that could vary from the positive surprise of the past.

2. Strategic Divestiture Impact:
   • DLTR's sale of its Family Dollar segment for $1 billion is a significant strategic shift. This divestiture is expected to streamline operations and refocus efforts on its core Dollar Tree brand. While this move is generally positive, it may also indicate a reduction in future revenue streams.
3. Market Conditions and Challenges:
   • The company is facing inflation, retail theft, and the end of pandemic-era government benefits, which have impacted Family Dollar's performance. These factors could potentially affect the profitability of the remaining Dollar Tree stores as well.
   • Additionally, the upcoming tariffs on imports could hurt the company's gross margins, as a significant portion of its purchases are imported. This could negatively impact profitability and, consequently, EPS.
4. Analyst Expectations and Price Targets:
   • Analysts have set an average 12-month stock price target of $84.11 for DLTR, with a low estimate of $70 and a high estimate of $140. This suggests a potential for the stock to increase from its current price, which could be positive for EPS if realized.
   • However, given the mixed signals from revenue expectations, strategic shifts, and external factors like tariffs, maintaining a positive EPS surprise streak will depend on Dollar Tree's ability to navigate these challenges effectively.
5. Financial Health and Growth Prospects:
   • DLTR's financial health score is "fair performance," which indicates a need for careful management to sustain growth. The company's guidance for FY 2026 revenue is set between $18.50 billion and $19.10 billion, which represents a potential for growth but also suggests a range of possibilities.

In conclusion, while there are positive indicators such as the recent earnings beat and strategic divestiture, the potential impact of market conditions, tariffs, and revenue expectations suggests that maintaining a positive EPS surprise streak in 2026 will be challenging. DLTR will need to execute its strategy effectively and navigate the external challenges to achieve this goal.