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Things You Must Know Ahead of Dollar Tree's (DLTR) Q2 Earnings

Zacks Equity Research
·4 min read

Dollar Tree, Inc. DLTR is slated to release second-quarter fiscal 2020 results on Aug 27. In the last reported quarter, the company delivered an earnings surprise of 22.4%. Notably, it has trailing four-quarter earnings surprise of 7.3%, on average.

The Zacks Consensus Estimate for the company’s fiscal second-quarter earnings is pegged at 90 cents per share, which indicates an 18.4% decline from the figure reported in the year-ago quarter. Notably, the consensus mark has moved down by a penny in the past seven days. The Zacks Consensus Estimate for revenues is pegged at $6.21 billion, which calls for 8.2% growth from the prior-year quarter’s reported number.

Key Factors to Note

On its last reported quarter’s earnings call, Dollar Tree stated that it was witnessing strong momentum in its business in the early fiscal second quarter, following the volatility in the first quarter. The company’s top line has been benefiting from the continuity of its store operations as well as an extraordinary spike in demand for certain products due to the pandemic.

Dollar Tree, Inc. Price and EPS Surprise

 

Dollar Tree, Inc. Price and EPS Surprise
Dollar Tree, Inc. Price and EPS Surprise

Dollar Tree, Inc. price-eps-surprise | Dollar Tree, Inc. Quote

Coming to its stores, its Family Dollar stores have been witnessing improvements in discretionary categories since the start of the fiscal second quarter. Further, the Dollar Tree stores have been seeing a rebound in its discretionary categories like crafts, graduation, stationery, Mother’s Day seasonal and balloons. Strength in the businesses is expected to get reflected in the company’s comparable store sales (comps) performance in the fiscal second quarter.

Further, it is likely to have benefited from SG&A expense leverage due to lower operating and corporate expenses, occupancy costs, and advertising.

However, higher payroll costs due to the coronavirus outbreak are expected to have weighed on margins and the bottom line. Notably, the company has been experiencing incremental payroll expenses for premium wage payments to frontline associates in stores and distribution centers, and field management staff bonuses, which have been hurting gross and operating margins.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Dollar Tree this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dollar Tree carries a Zacks Rank #3 but an Earnings ESP of -2.64% makes surprise prediction difficult.

Stocks With Favorable Combination

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

Big Lots, Inc. BIG currently has an Earnings ESP of +5.04% and it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. BBY presently has an Earnings ESP of +1.97% and a Zacks Rank #2.

Dollar General Corporation DG currently has an Earnings ESP of +4.89% and a Zacks Rank #2.

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