Dollar General Corporation (DG), one of the largest discount retailers in the United States, is set to report first-quarter fiscal 2014 results on Jun 3, 2014. Last quarter, it posted breakeven earnings with both the Most Accurate estimate and the Zacks Consensus Estimate standing at $1.01 per share. Let us see how things are developing for this announcement.
Factors Influencing the Quarter
We remain concerned about the increasing gross margin pressure due to a rise in sales of low-margin carrying products. The increase in sales of lower margin merchandises weighed on the company’s gross margin that contracted approximately 58 basis points to 31.9% during the fourth quarter of fiscal 2013.
Earnings Whispers
Our proven model does not conclusively project Dollar General as likely to beat earnings this quarter. That 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. This is not the case here as you will see below.
Zacks ESP: ESP for Dollar General is 0.00%.This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 73 cents.
Zacks Rank #4 (Sell): Dollar General’s Zacks Rank #4 lowers the predictive power of ESP. We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows these to have the right combination of elements to post an earnings beat:
Aaron's, Inc. (AAN) has an Earnings ESP +6.52% and it carries a Zacks Rank #2 (Buy).
Red Robin Gourmet Burgers Inc. (RRGB) has an Earnings ESP of +1.11% and holds a Zacks Rank #2.
Sprouts Farmers Market, Inc. (SFM) has an Earnings ESP of +5.56% and a Zacks Rank #2.
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