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Dollar General (DG) Q3 Earnings: Is a Beat in the Cards?


Dollar General Corporation DG is scheduled to report third-quarter fiscal 2017 results on Dec 7. In the preceding quarter, the company delivered a positive earnings surprise of 0.9%. Notably, the company’s earnings have surpassed the Zacks Consensus Estimate by an average of 1.8% in three of the trailing four quarters. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The current Zacks Consensus Estimate for the quarter is 94 cents, up nearly 6% year over year. Analysts polled by Zacks anticipate revenues of $5,803 million, up roughly 9% from the year-ago quarter. Well the obvious question that comes to mind is whether Dollar General will be able to post positive earnings surprise in the quarter under review. Let’s take a look at factors influencing the quarter.

Factors at Play

We believe the company’s results in the quarter to be reported will be driven by the buyout of 285 Acquired Stores. Earlier, the company raised fiscal 2017 outlook primarily due to recent store buyout deal. It anticipates GAAP earnings in the band of $4.35-$4.50 per share, up from the previous guided range of $4.25-$4.50. Further, the company’s commitment toward better price management, cost containment, private label offering, effective inventory management, merchandise and operational initiatives bode well. Moreover, in order to increase traffic, Dollar General is focusing on both consumables and discretionary items.

Analyst surveyed by the Zacks expects sales in the Consumables category to be $4,477 million, up 8.2% year over year. Meanwhile, Home products sales are projected to be $340 million, up 3% year over year.

Of late, Dollar General has been bearing the brunt of price deflation and the reduction in SNAP benefits that may weigh on comparable-store sales performance. The current administration is suggesting on reducing food stamps program. Cut in SNAP benefit may hurt performance as people with low income will have less money to spend and could restrict their spending to low margin products.

Dollar General Corporation Price, Consensus and EPS Surprise

Dollar General Corporation Price, Consensus and EPS Surprise | Dollar General Corporation Quote

What the Zacks Model Unveils

Our proven model shows that Dollar General is likely to beat estimates this quarter as the stock has the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen.

Dollar General has an Earnings ESP of +0.89% and carries a Zacks Rank #2. This makes us reasonably confident that the bottom line is likely to outperform estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks with Favorable Combination

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

Korn/Ferry International KFY has an Earnings ESP of +0.39% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tailored Brands, Inc. TLRD has an Earnings ESP of +3.70% and a Zacks Rank #2.

Dave & Buster's Entertainment, Inc. PLAY has an Earnings ESP of +2.70% and a Zacks Rank #3.

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