Will Higher Revenues Drive Dollar General's (DG) Q4 Earnings?

Dollar General Corporation (NYSE:DG) is scheduled to report fourth-quarter fiscal 2019 results on Mar 12. We note that in the trailing four quarters, the company’s bottom line outperformed the Zacks Consensus Estimate by 4.3%, on average. In the last reported quarter, the company delivered a positive earnings surprise of 2.9%.

The Zacks Consensus Estimate for fourth-quarter earnings is currently pegged at $2.02, which indicates an improvement of 9.8% from the year-ago quarter. The consensus mark has remained unchanged in the past 30 days. The Zacks Consensus Estimate for revenues is pegged at $7,148 million, suggesting growth of 7.5% from the prior-year period.

The consensus estimates for revenues and earnings per share for fiscal 2019 stand at $27.74 billion and $6.65, respectively.

Dollar General Corporation Price and EPS Surprise

Dollar General Corporation Price and EPS Surprise

Dollar General Corporation price-eps-surprise | Dollar General Corporation Quote

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 same-store sales is currently pegged at 3.4%.

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.

In the last earnings call, management had guided fiscal 2019 adjusted earnings in the band of $6.55-$6.65 per share and projected net sales growth in the low 8% range.

What the Zacks Model Unveils

Our proven model does not conclusively predict 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 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.

Although Dollar General carries a Zacks Rank #3, it has an Earnings ESP of -0.47%.

3 Stocks With Favorable Combination

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

DICK'S Sporting Goods (NYSE:DKS) has an Earnings ESP of +5.16% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gap (NYSE:GPS) has an Earnings ESP of +0.08% and a Zacks Rank #3.

RH (NYSE:RH) has an Earnings ESP of +1.61% and a Zacks Rank #3.

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