Family Dollar

Family Dollar (FDO) shares were rising Wednesday after the company topped earnings expectations and gave an outlook that exceeded the Street view.

Family Dollar said second-quarter earnings rose 36% to 81 cents a share, topping the consensus target of 78 cents a share, as well as the company’s own upwardly revised guidance of 70 cents to 80 cents a share.

The company highlighted its inventory management, which reduced per-store inventories by 10.3% this year, vs. a 6.6% decline in the November quarter. Accounts payable leverage also improved, wrote William Blair analyst Mark Miller.

The discount retailer said it expects same-store sales to rise between 6% and 8% during the current quarter. It forecast earnings of 71 cents to 76 cents a share, for the quarter, and between $2.48 and $2.58 a share for the year.

That just surpasses Wall Street’s view of 70 cents a share for the quarter, and $2.47 a share for the year.

The bottom line: Miller raised estimates but didn’t change his market perform rating. “However, in light of the strong quarter, encouraging outlook, and relatively modest valuation, we expect the shares will react positively Wednesday morning,” he wrote. “The greatest risks remain the difficult sales comparisons through the middle of 2010 and the potential for more aggressive price competition from Wal-Mart (WMT).”

Sony

Sony (SNE) shares were off by more than 1% early Wednesday after a downgrade jostled investors.

Citi analysts downgraded Sony shares to hold and revised 2011 and 2012 forecasts, saying the share price now reflects investors’ hopes on restructuring.

The earnings recovery might not live up to the equity markets’ expectations, and shares could undergo a “reality check” ahead of the next guidance announcement, wrote analyst Koto Ezawa.

The bottom line: “Unlike last October when we upgraded Sony, the price now looks to be up with the events,” Ezawa wrote. “Moreover, we think the earnings recovery is now at risk of being more modest than the equity market expects.” However, shares might still have room to rise if there is further progress in new products or changes to the supply chain the boost the television business operating margin, the analyst wrote.

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