Zacks Analyst Blog Highlights: Montpelier Re Holdings, RenaissanceRe Holdings, Family Dollar Stores, Wal-Mart Stores and Dollar General Corporation

Mar 16, 2011, 09:37 ET from Zacks Investment Research, Inc.

CHICAGO, March 16, 2011 /PRNewswire/ -- Analyst Blog features: Montpelier Re Holdings Ltd. (NYSE: MRH), RenaissanceRe Holdings Ltd. (NYSE: RNR), Family Dollar Stores Inc. (NYSE: FDO), Wal-Mart Stores Inc. (NYSE: WMT) and Dollar General Corporation (NYSE: DG).


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Here are highlights from Tuesday's Analyst Blog:

Montpelier Estimates Losses

Montpelier Re Holdings Ltd. (NYSE: MRH) expects preliminary net loss to approximate $70 million, net of reinstatement premium, attributable to the earthquake in New Zealand in February 2011. The company also expects to incur a loss of $15 million from the January floods and Cyclone Yasi in Australia.

The company has forecast total insured market losses of roughly $12 billion resulting from the New Zealand earthquake.

During 2010, Montpelier incurred $135.9 million in net losses associated with earthquakes in Chile and New Zealand. The combined ratio in 2010 deteriorated substantially to 82% from 62.2% in 2009.

Montpelier reported fourth quarter 2010 operating income of 81 cents per share, surpassing the Zacks Consensus Estimate of 74 cents. The outperformance mainly resulted from higher premiums.

The Zacks Consensus Estimate for first-quarter 2011 is 65 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $2.51 per share and $2.45 per share.

We expect the current pricing environment in the primary insurance market and the stressed economy to restrict top-line growth. Additionally, there exists execution risk with the newer platforms and we expect investment yields to remain under pressure in the near term.

We maintain our long-term Underperform recommendation on Montpelier. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the stock over the near term.

Headquartered in Pembroke, Bermuda, Montpelier -- through its subsidiaries in the U.S., the U.K. and Switzerland -- provides customized and innovative reinsurance and insurance solutions to the global market. It competes with RenaissanceRe Holdings Ltd. (NYSE: RNR).

Family Dollar Sales Up, Guides Higher

Family Dollar Stores Inc. (NYSE: FDO), the operator of self-service retail discount store chains, recently posted healthy sales results for the second quarter ended February 26, 2011.

The company's comparable-store sales rose 5.1% for the second quarter of 2011, with net sales rising by 8.3% to $2.26 billion compared with $2.09 billion delivered in the prior-year quarter, driven by strong performance at consumable and seasonal segment.

Based in Matthews, North Carolina, Family Dollar Stores noted that sales in January were adversely affected by winter storms, while spring-like conditions facilitated healthy sales in February.

Year to Date

Family Dollar registered a growth of 6.0% in comparable-store sales during the period. Further, the company enhanced the shareholders return by increasing the quarterly cash dividend by 16.1% coupled with an 8.9 million share repurchases for approximately $408.0 million. Meanwhile, it completed an initial public debt offering of $300.0 million in 10-year notes.

Moreover, the company opened 146 new stores compared with 86 store openings during the same period last year. Family Dollar also refurbished 313 stores and aims to achieve its target of 800 store reformations in fiscal 2011.  

Guidance Goes Up

Buoyed by healthy sales results, Family Dollar now expects earnings to be in the range of 97 cents to 98 cents per share for the second quarter of fiscal 2011 compared with its earlier expectation of 92 cents to 97 cents per share.

The current Zacks Consensus Estimate for the second quarter of 2011 is 98 cents per share.

It's Trian Again

Trian group, led by Nelson Peltz approached Family Dollar's board to reassess its bid. Earlier, the retailer refused a voluntary offer from Trian Group for the buyout as it felt that the bid significantly underrated the company. Trian Group, the largest shareholder of the company with approximately 8.0% stake, has offered $55.0 to $60.0 per share or approximately $7.0 billion to Family Dollar.

Our View

Family Dollar Stores, which operates a chain of retail discount stores in the United States, faces stiff competition from Wal-Mart Stores Inc. (NYSE: WMT) and Dollar General Corporation (NYSE: DG).  It offers general merchandise in four categories: consumables, home products, apparel and accessories, and seasonal and electronics.  The company presently operates 6,888 stores in 44 states.

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