Outperform/Speculative - Price 10.59 on Nov. 24
by Morgan Keegan

Fred's operates 665 general-merchandise discount stores...About half have pharmacy operations and are franchised. Third-quarter EPS of 13 cents was in line with consensus -- versus our estimate of 12 cents -- with upside versus our estimate from expense-management. 4Q EPS guidance of 17 cents to 24 cents on a flat comp[arative-store sales] compares to consensus 24 cents. We are lowering our 4Q estimate from 25 cents to 19 cents. Management is comfortable with a 2010 consensus estimate of 81 cents a share. We are lowering our fiscal-year 2010 estimate from 87 cents to 80 cents. Fred's capital structure continues to improve...and management plans to initiate a major rebranding in 2010 with significant improvement in product layout and seasonal exposure, wider aisles, lower product profiles and more value offerings of apparel. Target: 11. Market cap: $424 million.

Fred's has trailed its dollar-store competitors on numerous metrics, including stock-price gains. That could change under a new CEO, and the shares could head toward 20 from 12.

increased the Company's quarterly cash dividend to $0.03 per share from the prior dividend of $0.02 per share, payable on June 15, 2009, to shareholders of record as of June 1, 2009.

0.97

Buy - Price 8.16 on Jan. 9
by Wedbush Morgan

We believe December comps [at Fred's stores, many of which have pharmacies] were hurt by slower consumer spending, a shift to generics, softer flu season year-over-year [and]...weak sales of apparel, home; strength [was] in consumables, electronics, and pets...[and] inventories look to be in good shape. Our 12 target assumes FRED should trade around 15 times our fiscal-year '08 earnings-per-share estimate of 77 cents [or] 1 times our projected longer-term earnings growth rate of 15%, despite challenging environment. Market-cap: $340 million.

undervalue small cap