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Dollar Tree (DLTR) to Post Q1 Earnings: Is a Beat in Store?

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Dollar Tree, Inc. (DLTR - Free Report) is slated to release first-quarter fiscal 2018 results on May 31, before the market opens. The company pulled off an average earnings beat of 6.1% in the trailing four quarters. However, it delivered a negative earnings surprise of 0.5% in fourth-quarter fiscal 2017.

Although the Zacks Consensus Estimate of $1.23 for first-quarter earnings moved south by a penny in the last 30 days, it reflects a year-over-year increase of 25.5%. Management envisions earnings per share in the band of $1.18-$1.25 for the to-be-reported quarter.

Dollar Tree, Inc. Price, Consensus and EPS Surprise

Dollar Tree, Inc. Price, Consensus and EPS Surprise | Dollar Tree, Inc. Quote

 

So let’s see how things are shaping up prior to the earnings announcement.

Factors at Play

Dollar Tree has been gaining from Family Dollar integration and re-banner process, which is likely to generate run rate savings of about $300 million in the next three years. It is also undertaking significant store renovations for the Family Dollar banner to attract more customers. Meanwhile, Dollar Tree remains focused on store base expansion and new technological advancements.

Also, the company’s top line has been benefiting from solid performance at both Dollar Tree and Family Dollar stores. In fourth-quarter fiscal 2017, comparable store sales (comps) improved for the 40th straight quarter, driven by competitive pricing and its strategic store expansion plans, including remodeling and relocations. For first-quarter fiscal 2018, consolidated net sales are projected to be $5.53-$5.63 billion, with low single-digit comps growth.

Notably, analysts surveyed by Zacks expect quarterly revenues to come in at $5.57 billion, up nearly 5.4% from the year-ago period.

Lower merchandise costs, reduced markdowns and occupancy expenses have also been aiding the company’s margins. In fact, all these aforementioned tailwinds make us optimistic about the company’s upcoming quarterly results.

However, Dollar Tree has underperformed the industry in the past year. While the stock has gained 18.9%, the industry rallied 21.5%. Furthermore, volatile consumer behavior and significant global exposure pose threats to the company, which might hurt its profitability.

Zacks Model

Our proven model shows that Dollar Tree is likely to beat estimates this quarter. This is because, it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to be confident of an earnings surprise call. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dollar Tree has an Earnings ESP of +0.20% and a Zacks Rank #3, which make us confident about an earnings surprise.

Other Stocks With Favorable Combination

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

Dollar General Corporation (DG - Free Report) has an Earnings ESP of +1.97% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PVH Corp. (PVH - Free Report) has an Earnings ESP of +0.56% and a Zacks Rank of 2.

Ulta Beauty, Inc. (ULTA - Free Report) has an Earnings ESP of +0.46% and a Zacks Rank #2.

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