Dollar General Hits 52-Week High

Zacks

Shares of Dollar General Corporation (DG) touched a new 52-week high of $59.13 on Oct 18, and eventually closed trade at $58.89. This specialty retailer has amassed a year-to-date return of 37.2%.

The average volume of shares traded over the last 3 months was approximately 2,727.9K. Moreover, the company currently trades at a forward P/E of 18.20x, a 3.4% discount to the peer group average of 18.85x. The last traded price is 3.1% below the Zacks Consensus average analyst price target of $60.77. Additionally, the company’s long-term estimated earnings per share (EPS) growth rate is 15.2%. Dollar General now carries a Zacks Rank #2 (Buy).

Dollar General’s commitment toward improving its price management, cost containment, private label offering, inventory management and operational initiatives will likely drive sales and margin growth. Moreover, in order to increase traffic, Dollar General is focusing on both consumables and discretionary categories.

Further, Dollar General boasts a history of impressive comparable-store sales growth, which has remained robust despite unfavorable macroeconomic conditions mainly due to competitive pricing and attractive store expansion strategies. Fiscal 2012 marked the company’s 23rd consecutive year of comparable-store sales growth.

Dollar General is also opening new stores at a fast pace. The company opened 375 new outlets and remodeled or relocated 377 stores during the first half of 2013. In fiscal 2013, it plans to open 650 new stores and remodel or relocate about 550 outlets. Recently, the company achieved a milestone when it unveiled its 11,000th outlet in Murfreesboro, Tenn. on Oct 7, 2013.

Dollar General is currently witnessing steady top and bottom-line growth as evident from its strong second-quarter fiscal 2013 results. The quarterly earnings rose 11.6% to 77 cents a share, while net sales increased 11.3% to $4,394.7 million. This was primarily due to robust performance at the Consumables category.

We also commend the company’s positive earnings surprise history. In the last 10 quarters, Dollar General surpassed the Zacks Consensus Estimate 8 times with an average beat of 4.2%.

Looking ahead, Dollar General continues to project fiscal 2013 earnings in the range of $3.15 to $3.22 per share. The current Zacks Consensus Estimate for the year is $3.23 per share. Total sales are expected to rise by 10% to 11% year over year, while same-store sales are expected to increase by 4% to 5%.

Apart from Dollar General, other stocks such as Best Buy Co., Inc. (BBY), Constellation Brands Inc. (STZ) and Cummins Inc. (CMI) achieved new 52-week highs of $43.27, $64.35 and $136.87, respectively.

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