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Why Dollar Tree Unveils a Bullish Picture Post Q3 Earnings

Zacks

Dollar Tree, Inc. DLTR is progressing well with the integration of Family Dollar, which is contributing significantly to the company’s results. Also, it has been benefiting from its strategic initiatives and store expansion program. Evidently, the company posted robust third-quarter fiscal 2017 results, following which management raised its outlook for the year.

Shares of Dollar Tree have gained 6.9% since it reported third-quarter results on Nov 21. So far this year, the stock has rallied 37.8%, outperforming the industry’s growth of 11.4%. Also, it has a VGM Score of B with a long-term earnings growth rate of 13.1%. In fact, the solid quarterly results and raised outlook have increased optimism among analysts. This is quite apparent from the uptrend in the Zacks Consensus Estimate.



Positive Estimate Revisions

The Zacks Consensus Estimate for the fourth quarter and fiscal 2017 has moved up 5 cents to $1.85 and 15 cents to $4.81, respectively, in the past 30 days. Also, for fiscal 2018, the estimate has moved north by 17 cents to $5.21. This resulted from Dollar Tree’s spectacular performance in the fiscal third quarter, which also marked the company’s second straight earnings and sales beat. The company posted quarterly adjusted earnings of $1.01 per share that improved 40.3% year over year and surpassed the consensus mark of 90 cents.

Additionally, comparable store sales (comps) for the third quarter increased 3.2% in constant-currency driven by improved customer count and average ticket. Including the impact of Canadian currency fluctuations, comps improved 3.3%. Notably, this marks the 39th straight time of comps growth. (Read: Dollar Tree Stock Jumps on Q3 Earnings Beat, View Up)

For 2017, management now envisions adjusted earnings in the range of $4.64-$4.73 per share compared with $4.44-$4.60, projected earlier. Also, Dollar Tree provided a solid outlook and anticipates earnings in the band of $1.80-$1.89 per share for the fourth quarter.

Growth Catalysts

Dollar Tree’s long-term growth strategy remains intact. We believe that the company is progressing well with its growth initiatives, which include store expansion strategies, enhancement of store productivity, creating new store formats, tapping of new markets and incorporating innovative sales channels to serve its patrons better. Further, we remain confident that the company will continue to implement strategies such as increasing consumables mix, rolling out freezers/coolers at stores along with multi-price point expansion to boost top-line performance.

Meanwhile, Dollar Tree is concentrating on expanding its store base and incorporating technological advancements. The company also leverages an extensive network of stores to effectively penetrate targeted markets, which enables it to generate healthy sales and gain market share. Apparently, in the third quarter, the company opened 169 outlets.

Bottom Line

Optimistic analysts’ view along with the company's robust growth strategies makes this Zacks Rank #2 (Buy) stock a favorable pick for investors.

Three More Stocks That Witnessed Favorable Estimate Revisions Lately

The fourth quarter and fiscal 2018 consensus mark for Hibbett Sports, Inc. HIBB has moved up by a penny and 12 cents, respectively, to 25 cents per share and $1.42 over the last 30 days. This sporting goods retailer sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The fiscal 2017 consensus mark for Ross Stores Inc. ROST has moved up by 6 cents to $3.28 over the past 30 days. This discount store retailer has a Zacks Rank #2.

The Home Depot, Inc. HD has seen estimates for the fourth quarter and fiscal 2017 increase from $1.59 to $1.61 and $7.31 to $7.37, respectively, over the past 30 days. This world’s largest home improvement specialty retailer carries a Zacks Rank #2.

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