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Dollar Tree (DLTR) to Post Q3 Earnings: What's in the Offing?

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Dollar Tree, Inc. (DLTR - Free Report) is slated to release third-quarter fiscal 2020 results on Nov 24. In the last reported quarter, the company delivered an earnings surprise of 23.6%. Notably, it has a trailing four-quarter earnings surprise of 11%, on average.

The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at $1.15, which indicates 6.5% growth from the figure reported in the year-ago quarter. Notably, the consensus mark has been unchanged in the past 30 days. The Zacks Consensus Estimate for revenues is pegged at $6.11 billion, which suggests 6.4% growth from the prior-year quarter’s reported number.

Key Factors to Note

Sound business fundamentals along with favorable customer response toward assortments have been driving the company’s performance. Notably, gains in its Dollar Tree and Family Dollar segments have been aiding comparable store sales (comps). Robust comps growth has been aiding the top line, which along with margin growth is expected to have bolstered earnings.

Dollar Tree, Inc. Price and EPS Surprise

 

Dollar Tree, Inc. Price and EPS Surprise

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

The company’s Family Dollar stores have been witnessing increased spending in discretionary categories from the start of the fiscal second quarter. Also, Dollar tree stores have been gaining from the rebound in the sale of discretionary items in the fiscal second quarter, after witnessing a decline in the first quarter. Product lines, including kitchenware, crafts, housework products, party celebrations, and beauty and eyewear, have been witnessing growth at Dollar Tree stores. Additionally, its expanded Crafter’s Square assortments are expected to have performed very well. Strength in the businesses is expected to get reflected in the company’s comps performance in the fiscal third quarter.

On its last reported quarter’s earnings call, management predicted that the Family Dollar stores will continue to witness solid comps trends in the fiscal third quarter.

However, higher payroll costs related 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 has a Zacks Rank #4 and an Earnings ESP of 0.00%.

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.

Signet Jewelers Limited (SIG - Free Report) currently has an Earnings ESP of +13.95% and it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Central Garden & Pet Company (CENT - Free Report) has an Earnings ESP of +57.14% and a Zacks Rank #2 at present.

Best Buy Co. Inc. (BBY - Free Report) currently has an Earnings ESP of +14.92% and a Zacks Rank #2.

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