We expect Dollar General Corporation (DG), a discount retailer, to beat expectations when it reports second-quarter fiscal 2013 results on Sep 4, 2013.
Why a Likely Positive Surprise?
Our proven model shows that Dollar General is likely to beat earnings because it has the right combination of two key components.
Positive Zacks ESP: Dollar General currently has an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +1.35%. This is because the Most Accurate Estimate stands at 75 cents, while the Zacks Consensus Estimate is pegged at 74 cents.
Zacks Rank #2 (Buy): Note that stocks with a Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The sell-rated stocks (Zacks Rank #4 and #5) should never be considered going into an earnings announcement.
The combination of Dollar General’s Zacks Rank #2 (Buy) and +1.35% ESP makes us very confident regarding a positive earnings beat on Sep 4.
What is Driving the Better-than-Expected Earnings?
Dollar General’s merchandising initiatives, including addition of private-label brands; remodeling endeavors; expansion of the selling area; and share buyback program make us confident on the stock outperformance in the second quarter. The positive trend is seen in the trailing four-quarter average surprise of 4.8%.
Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
The Buckle, Inc. (BKE), Earnings ESP of +2.20% and a Zacks Rank #2 (Buy).
Zumiez, Inc. (ZUMZ), Earnings ESP of +5.88% and a Zacks Rank #3 (Hold).
Dollar Tree, Inc. (DLTR), Earnings ESP of +1.70% and a Zacks Rank #3 (Hold).
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