Advertisement
Canada markets open in 8 hours 45 minutes
  • S&P/TSX

    21,611.30
    +23.42 (+0.11%)
     
  • S&P 500

    5,487.03
    +13.80 (+0.25%)
     
  • DOW

    38,834.86
    +56.76 (+0.15%)
     
  • CAD/USD

    0.7288
    -0.0004 (-0.05%)
     
  • CRUDE OIL

    81.56
    -0.01 (-0.01%)
     
  • Bitcoin CAD

    89,924.31
    -200.47 (-0.22%)
     
  • CMC Crypto 200

    1,352.87
    -36.53 (-2.63%)
     
  • GOLD FUTURES

    2,342.50
    -4.40 (-0.19%)
     
  • RUSSELL 2000

    2,025.23
    +3.22 (+0.16%)
     
  • 10-Yr Bond

    4.2170
    -0.0620 (-1.45%)
     
  • NASDAQ futures

    19,940.25
    +21.00 (+0.11%)
     
  • VOLATILITY

    12.30
    -0.45 (-3.53%)
     
  • FTSE

    8,191.29
    +49.14 (+0.60%)
     
  • NIKKEI 225

    38,561.63
    +79.52 (+0.21%)
     
  • CAD/EUR

    0.6786
    +0.0001 (+0.01%)
     

Time to Buy Dollar Tree (DLTR) or Dollar General's (DG) Stock as Q1 Earnings Approach?

Last week, strong first quarter results from Walmart WMT helped boost sentiment for discount retailers and investors may be eyeing Dollar Tree DLTR and Dollar General’s DG stock ahead of their Q1 reports on Thursday, May 23, and Thursday, May 30 respectively.

With that being said, let’s see if now is a good time to buy stock in either of these iconic discount retailers.

Q1 Overview & Expectations 

Based on Zacks estimates, Dollar Tree’s Q1 sales are expected to rise 4% to $7.64 billion. However, Dollar Tree's Q1 EPS is expected to dip -1% to $1.45 and Wall Street will be monitoring its inventory as the company is in the process of closing 600 of its Family Dollar locations this year. The move is aimed at improving profitability with excessive inventory from the higher-priced Family Dollar consumer products being sold at its flagship Dollar Tree stores for the time being.  

ADVERTISEMENT

As for Dollar General, Q1 earnings are expected to fall to $1.57 a share versus EPS of $2.34 in a very profitable and tough-to-compete against prior-year quarter. Still, quarterly sales are thought to have risen 5% to $9.85 billion.

Recent Price Performance

Dollar Tree’s stock has fallen -19% year to date mostly attributed to the company's annoucement that it accrued $2 billion in impairment charges due to its plan to close hundreds of Family Dollar stores. Meanwhile, Dollar General shares have risen a respectable +5% YTD although this has also trailed the broader indexes and Walmart’s +22%.

Furthermore, investors may be contemplating on buying the dip in DLTR and DG with both down nearly -30% in the last year. The decline comes as Dollar Tree and Dollar General have lost their inflationary mojo associated with consumers seeking cost savings although their growth and valuations remain attractive.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

EPS Outlook

It's noteworthy that Dollar Tree currently has an “A” Zacks Style Scores grade for Growth with Dollar General having a “B” grade for the trading indicator.

In this regard, Dollar Tree’s annual earnings are projected to climb 17% in its current fiscal 2025 and are expected to climb another 17% in FY26 to $8.14 per share. More impressive, FY26 EPS projections would represent 40% growth over the last five years.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Pivoting to Dollar General, annual earnings are expected to dip -3% in its current FY25 but are forecasted to rebound and jump 13% in FY26 to $8.23 per share. With that being said, FY26 projections would be a -19% dip over the last five years with Dollar General’s EPS at a very strong $10.17 in 2022.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 Valuation Comparison (P/E)

Dollar Tree and Dollar General both check an “A” Zacks Style Scores grade for Value. Dollar Tree’s stock trades at a 16.2X forward earnings multiple with Dollar General trading at 18.9X. Notably, both trade at a slight discount to their Zacks Retail-Discount Stores Industry average of 20.6X and Walmart’s 26.7X.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Takeaway

Buying the dip in Dollar Tree and Dollar General’s stock is very tempting but for now, they both land a Zacks Rank #3 (Hold). To that point, Q1 results will be critical to see if these large discount retailers can reconfirm a favorable outlook and make an argument for a sharp rebound in their price performances.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Dollar General Corporation (DG) : Free Stock Analysis Report

Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report

Walmart Inc. (WMT) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research