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Dollar General's (DG) Q3 Earnings Likely to Rise: Here's Why

Zacks Equity Research

Dollar General Corporation DG is scheduled to report third-quarter fiscal 2019 results on Dec 5. We note that in the trailing four quarters, the company’s bottom line has outperformed the Zacks Consensus Estimate by 3.6%, on average. In the last reported quarter, the company delivered a positive earnings surprise of 10.1%.

The Zacks Consensus Estimate for third-quarter earnings is currently pegged at $1.38, which indicates an increase of 9.5% from the year-ago quarter’s reported figure. The consensus mark has remained unchanged in the past 30 days. The Zacks Consensus Estimate for revenues is pegged at $6,919 million, suggesting growth of 7.8% from the prior-year period.

Key Factors to Note

Dollar General’s better price management, private label offering, effective inventory management and operational initiatives have been driving sales. Additionally, the expansion of cooler facilities has been aiding the sale of perishable items.

Management’s two transformational strategic initiatives, DG Fresh, designed to enable self-distribution of fresh and frozen products, and Fast Track, an in-store labor productivity and customer convenience initiative have been aiding the results. As part of its non-consumable initiative, the company has been focusing on categories namely home, domestics, housewares, party and occasion.

Backed by the aforementioned tailwinds, Dollar General boasts an impressive same-store sales trend. Rise in average transaction and customer traffic have been driving comps. The Zacks Consensus Estimate for the metric is currently pegged at 2.7%.

However, any deleverage in SG&A rate owing to startup expenses, Fast Track initiative and other ongoing investments cannot be ignored. Increasing threat from online retailers on parameters such as same-day delivery and pricing is also a concern.

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 predicts an earnings beat for Dollar General this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 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 #2 and an Earnings ESP of +1.23%.

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:

G-III Apparel Group GIII has an Earnings ESP of +0.94% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco COST has an Earnings ESP of +1.01% and a Zacks Rank #2.

Big Lots BIG has an Earnings ESP of +3.85% and a Zacks Rank #3.

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Costco Wholesale Corporation (COST) : Free Stock Analysis Report
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