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Will Dollar General (DG) Register Higher Earnings in Q2?

Zacks Equity Research

Dollar General Corporation DG is scheduled to report second-quarter fiscal 2019 results on Aug 29. Well the first question that is likely to cross an investor’s mind is whether this discount retailer will be able to pull off positive earnings surprise in the to-be-reported quarter. In the last reported quarter, the company’s bottom line outpaced the Zacks Consensus Estimate by 6.5%.

How Are Estimates Faring?

After registering a bottom-line increase of 8.8% in the first quarter of fiscal 2019, Dollar General is likely to witness year-over-year growth of roughly 4% in the second quarter. The Zacks Consensus Estimate for the quarter under review is pegged at $1.58 compared with $1.52 reported in the year-ago quarter. We note that the Zacks Consensus Estimate has remained unchanged in the past 30 days. The Zacks Consensus Estimate for revenues is pegged at $6,890 million, up about 7% from the year-ago period.

Factors Likely to Influence the Performance

Dollar General’s commitment toward better price management, private label offering, effective inventory management, merchandise and operational initiatives is likely to drive sales. This is evident from the aforementioned Zacks Consensus Estimate.

These initiatives along with a compelling store growth story at convenient locations, comparable-store sales (comps) growth and focus on consumable products provide the company an edge over its peers. Additionally, Dollar General is expanding cooler facilities to enhance the sale of perishable items, and rolling out DG digital coupon program and DG Go app.

Dollar General’s comps growth story is impressive. Rise in average transaction and customer traffic have been driving comps higher. The company is likely to continue with its positive comps performance in the to-be-reported quarter, as evident from the Zacks Consensus Estimate of 2.7%.

However, a deleverage in SG&A rate owing to higher labor expenses, occupancy costs and utilities expenses might affect margins. Moreover, increasing threat from online retailers on parameters such as same-day delivery and pricing might hurt the company's market share.

Dollar General Corporation Price, Consensus and EPS Surprise


Dollar General Corporation Price, Consensus and EPS Surprise

Dollar General Corporation price-consensus-eps-surprise-chart | Dollar General Corporation Quote

What the Zacks Model Unveils?

Our proven model shows that Dollar General is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dollar General has a Zacks Rank #3 and an Earnings ESP of +2.64%. This makes us reasonably confident that it is likely to outperform estimates.

3 More Stocks With Favorable Combination

Here are three more companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Casey’s General Stores CASY has an Earnings ESP of +8.43% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores BURL has an Earnings ESP of +0.17% and a Zacks Rank #2.

Costco COST has an Earnings ESP of +0.30% and a Zacks Rank #3.

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Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
Dollar General Corporation (DG) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
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