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Here's Why Dollar Tree (DLTR) is Poised for Q4 Earnings Beat

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Dollar Tree, Inc. (DLTR - Free Report) is likely to register an increase in the top line when it reports fourth-quarter fiscal 2021 results on Mar 2, before the market opens. The Zacks Consensus Estimate for revenues is pegged at $7.13 billion, indicating an improvement of 5.3% from the prior-year quarter.

The bottom line of the operator of discount variety retail stores is expected to decrease year over year. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.79 per share, suggesting a decline of 16% from the year-ago period. The figure has moved up by a penny in the past seven days.

Also, the Zacks Consensus Estimate for fiscal 2021 sales suggests year-over-year growth of 3.4%, while the same for earnings per share indicates a decline of 1.2%.

The company has a trailing four-quarter earnings surprise of 8.8%, on average. In the last reported quarter, the Chesapeake, VA-based company outperformed the Zacks Consensus Estimate by 1.1%.

Dollar Tree, Inc. Price and EPS Surprise

 

Dollar Tree, Inc. Price and EPS Surprise

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

Factors to Consider

Dollar Tree has been gaining from strength in the H2, Dollar Tree Plus and the new Combo Stores, which are part of the company’s Key Real Estate Initiatives. It is also poised to benefit from the expansion of the aforementioned stores as part of the plan. The company is progressing well with its store optimization initiatives.

The Family Dollar H2 stores have been performing well, with the newest format store, Combo Store, exceeding expectations. At the Dollar Tree banner, its multi-price point Dollar Tree Plus! concept store has been gaining popularity among customers, particularly for the discretionary categories. This has helped improve store productivity.

Also, its Crafter’s Square offerings have been performing well, driven by the expansion of its Crafter’s Square offerings to include essential and seasonal products. The initiatives are expected to have boosted the company’s top line in the to-be-reported quarter.

Dollar Tree’s restructuring and expansion initiatives, including steady store openings and improvement of distribution centers, are likely to have driven revenues. The company has been on track to leverage Family Dollar and Dollar Tree distribution center systems, and combined merchandise. This will help in bringing the latest products into Dollar Tree stores without any disruptions.

The company’s digital and omni-channel capabilities and same-day delivery service with Instacart are also expected to have driven traffic trends in the fiscal fourth quarter.

The aforementioned factors instill optimism regarding the upcoming results. On the last reported quarter’s earnings call, management predicted consolidated net sales of $7.02-$7.18 billion for fourth-quarter fiscal 2021. For fiscal 2021, the company expected net sales of $26.25-$26.41 billion compared with $26.19-$26.44 billion mentioned previously. Comps growth was forecasted to be in the low-single digits for the fourth quarter and fiscal 2021.

However, DLTR has continued to reel under dismal margins, which has been denting the bottom-line performance. Management, on its last reported quarter’s earnings call, envisioned fiscal 2021 earnings of $5.48-$5.58 per share, down from $5.40-$5.60 per share mentioned earlier.

The company has also been witnessing elevated industry-wide freight costs, including higher costs for inland transportation by truck and rail. Higher freight and supply-chain disruptions are likely to have acted as deterrents in the fiscal fourth quarter.

What the Zacks Model Unveils

Our proven model predicts 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 chances of an earnings beat. 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 #2 and an Earnings ESP of +3.05%.

Other Stocks With Favorable Combination

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

DICK’S Sporting Goods (DKS - Free Report) currently has an Earnings ESP of +4.86% and a Zacks Rank of 2. The company is likely to register an increase in the bottom line when it reports fourth-quarter fiscal 2021. The Zacks Consensus Estimate for quarterly earnings has moved north by 21.1% to $3.38 per share in the past 30 days, indicating a 39.1% rise from the year-ago quarter’s reported number. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $3.31 billion, which suggests a rise of 6% from the figure reported in the prior-year quarter. DKS has delivered an earnings beat of 104.2%, on average, in the trailing four quarters.

Nordstrom (JWN - Free Report) currently has an Earnings ESP of +0.38% and a Zacks Rank of 3. Although the Zacks Consensus Estimate for fourth-quarter fiscal 2021 earnings has moved down by a penny in the last 30 days to $1.79 per share, it indicates a significant growth of 395.2% from the year-ago quarter's reported number.

However, Nordstrom’s top line is expected to have risen year over year. The Zacks Consensus Estimate for JWN’s quarterly revenues is pegged at $4.42 billion, suggesting growth of 21.2% from the figure reported in the prior-year quarter. JWN has delivered an earnings beat of 24.7%, on average, in the trailing four quarters.

Abercrombie & Fitch (ANF - Free Report) currently has an Earnings ESP of +2.35% and a Zacks Rank of 3. The Zacks Consensus Estimate for fourth-quarter fiscal 2021 earnings moved down 3.8% to $1.28 per share, indicating a 14.7% decline from the year-ago quarter’s reported number.

However, Abercrombie’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.18 billion, which suggests a rise of 5.4% from the figure reported in the prior-year quarter. ANF has delivered an earnings beat of 112.5%, on average, in the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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