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Results: Dollar General Corporation Exceeded Expectations And The Consensus Has Updated Its Estimates

Simply Wall St
·3 min read

Dollar General Corporation (NYSE:DG) defied analyst predictions to release its first-quarter results, which were ahead of market expectations. Dollar General delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$8.4b, some 10% above indicated. Statutory EPS were US$2.56, an impressive 47% ahead of forecasts. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Dollar General

NYSE:DG Past and Future Earnings May 31st 2020
NYSE:DG Past and Future Earnings May 31st 2020

After the latest results, the 24 analysts covering Dollar General are now predicting revenues of US$31.8b in 2021. If met, this would reflect a modest 7.3% improvement in sales compared to the last 12 months. Per-share earnings are expected to swell 10% to US$8.56. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$30.6b and earnings per share (EPS) of US$7.54 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a nice increase in earnings per share in particular.

It will come as no surprise to learn that the analysts have increased their price target for Dollar General 9.9% to US$197 on the back of these upgrades. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Dollar General, with the most bullish analyst valuing it at US$220 and the most bearish at US$140 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to the analysts, with revenue forecast to grow 7.3%, in line with its 8.0% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 3.9% next year. So it's pretty clear that Dollar General is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Dollar General following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Dollar General analysts - going out to 2025, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for Dollar General you should be aware of.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.