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Bull of the Day: Dollar General (DG)

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Dollar General (DG - Free Report) is one of the largest discount retailers in the U.S., and offers low-priced merchandise typically $10 or less in its stores. Its product selection is wide, and customers can find everything from seasonal items to home products and apparel.

Strong Earnings Leads to Analyst Optimism

For the first quarter, DG reported a whopping 73% increase in earnings per share, and net sales increased 27.6% year-over-year.

Business was very strong in March, and comparable store sales surged 34.5% for the month alone.

Operating profit also saw strong growth, and was up almost 70% during the quarter. CFO John Garratt said this rise was primarily due to higher sales related to the coronavirus pandemic and general economic uncertainty.

As a result, analyst Kelly Bania from BMO Capital and analyst Anthony Chukumba from Loop Capital raised their price targets on the stock to $200 per share and $190 per share, respectively.

Both analysts pointed towards DG’s strong Q1 results, as well as higher demand during the Covid-19 lockdowns, as the reason for the increase.

DG is Soaring

 

 

Year-to-date, shares of DG are up about 19% compared to the S&P 500’s 4% decline. Earnings estimates have been rising, and Dollar General is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, 13 analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 67 cents to $8.11 per share; earnings are expected to increase 20.5% compared to the prior year period. 2021 looks strong as well, with 10 analysts boosting their earnings estimate for the year.

With unemployment at record highs, Dollar General has become a resource for consumers looking to by necessities and other goods at a discounted price. In many smaller communities, DG is often the only option to buy pantry staples.

The company just reported its 30th consecutive year of comps growth in 2019, and management is confident about their current growth trajectory.

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep DG on your shortlist.

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