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Will Expansion Plans Fuel Dollar Tree's (DLTR) Q2 Earnings?
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Dollar Tree, Inc. (DLTR - Free Report) is slated to release second-quarter fiscal 2018 results on Aug 30, before the market opens. In the preceding two quarters, the company pulled off a negative earnings surprise. However, it has an average trailing four-quarter positive earnings surprise of 5.6%.
The Zacks Consensus Estimate for second-quarter earnings remained stable at $1.15 over the last 30 days but reflects a year-over-year increase of 16.2%. Moreover, management envisions earnings per share to be in the band of $1.07-$1.16 in the to-be-reported quarter.
Dollar Tree, Inc. Price, Consensus and EPS Surprise
So let’s see how things are shaping up prior to the earnings announcement.
Factors at Play
Dollar Tree’s expansion plan that includes improvement of store productivity and store growth initiatives looks promising. In fact, the company has been benefiting from its restructuring and expansion initiatives via steady store openings and improvement of distribution centers. Also, it leverages an extensive network of stores to effectively penetrate targeted markets. This, in turn, helps Dollar Tree to generate healthy sales and expand market share.
Additionally, the ongoing integration of Family Dollar is significantly contributing to the company’s performance. Notably, sales from the Family Dollar banner represented nearly 50% of the company’s consolidated sales in the last reported quarter. Also, its focus on the consumables and discretionary categories along with the everyday low-price model are expected to boost traffic. Dollar Tree’s Smart Coupons are too gaining traction and should help increase conversion rate.
Meanwhile, Dollar Tree’s comparable store sales (comps) have been benefiting from competitive pricing and its strategic store expansion plans, including remodeling and relocations. Also, comps growth is aided by improved customer count and average ticket. For the fiscal second quarter, management anticipates comps growth in a low-single-digit range. Notably, the Zacks Consensus Estimate for quarterly revenues is pegged at $5.53 billion, up nearly 4.8% from the year-ago period. Moreover, analysts surveyed by Zacks expect comps to grow 3.2% in the second quarter, up from 2.4% comps growth in second-quarter fiscal 2017.
However, higher SG&A rate due to increased labor expenses, store payroll costs and utilities expenses might dent margins in the impending quarter. As Dollar Tree remains committed toward making further investments in expansions, cost hurdles associated with these might weigh on its margins. This apart, the company is facing higher freight and fuel-cost related challenges, which are expected to continue and hurt its growth and profitability.
Zacks Model
Our proven model conclusively shows that Dollar Tree is likely to beat earnings estimates in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Dollar Tree has an Earnings ESP of +2.41% and a Zacks Rank #2, which make us pretty confident of an earnings beat.
Other Stocks With Favorable Combination
Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:
American Eagle Outfitters, Inc. (AEO - Free Report) has an Earnings ESP of +2.44% and a Zacks Rank of 3.
lululemon athletica inc. (LULU - Free Report) has an Earnings ESP of +1.02% and a Zacks Rank #3.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Will Expansion Plans Fuel Dollar Tree's (DLTR) Q2 Earnings?
Dollar Tree, Inc. (DLTR - Free Report) is slated to release second-quarter fiscal 2018 results on Aug 30, before the market opens. In the preceding two quarters, the company pulled off a negative earnings surprise. However, it has an average trailing four-quarter positive earnings surprise of 5.6%.
The Zacks Consensus Estimate for second-quarter earnings remained stable at $1.15 over the last 30 days but reflects a year-over-year increase of 16.2%. Moreover, management envisions earnings per share to be in the band of $1.07-$1.16 in 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’s expansion plan that includes improvement of store productivity and store growth initiatives looks promising. In fact, the company has been benefiting from its restructuring and expansion initiatives via steady store openings and improvement of distribution centers. Also, it leverages an extensive network of stores to effectively penetrate targeted markets. This, in turn, helps Dollar Tree to generate healthy sales and expand market share.
Additionally, the ongoing integration of Family Dollar is significantly contributing to the company’s performance. Notably, sales from the Family Dollar banner represented nearly 50% of the company’s consolidated sales in the last reported quarter. Also, its focus on the consumables and discretionary categories along with the everyday low-price model are expected to boost traffic. Dollar Tree’s Smart Coupons are too gaining traction and should help increase conversion rate.
Meanwhile, Dollar Tree’s comparable store sales (comps) have been benefiting from competitive pricing and its strategic store expansion plans, including remodeling and relocations. Also, comps growth is aided by improved customer count and average ticket. For the fiscal second quarter, management anticipates comps growth in a low-single-digit range. Notably, the Zacks Consensus Estimate for quarterly revenues is pegged at $5.53 billion, up nearly 4.8% from the year-ago period. Moreover, analysts surveyed by Zacks expect comps to grow 3.2% in the second quarter, up from 2.4% comps growth in second-quarter fiscal 2017.
However, higher SG&A rate due to increased labor expenses, store payroll costs and utilities expenses might dent margins in the impending quarter. As Dollar Tree remains committed toward making further investments in expansions, cost hurdles associated with these might weigh on its margins. This apart, the company is facing higher freight and fuel-cost related challenges, which are expected to continue and hurt its growth and profitability.
Zacks Model
Our proven model conclusively shows that Dollar Tree is likely to beat earnings estimates in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Dollar Tree has an Earnings ESP of +2.41% and a Zacks Rank #2, which make us pretty confident of an earnings beat.
Other Stocks With Favorable Combination
Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:
Abercrombie & Fitch Co. (ANF - Free Report) has an Earnings ESP of +44.74% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Eagle Outfitters, Inc. (AEO - Free Report) has an Earnings ESP of +2.44% and a Zacks Rank of 3.
lululemon athletica inc. (LULU - Free Report) has an Earnings ESP of +1.02% and a Zacks Rank #3.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>