We expect Dollar General Corporation DG, one of the largest discount retailers in the United States, to beat expectations when it reports fourth-quarter fiscal 2014 results on Mar 12, 2015. In the last quarter, the company had posted a negative earnings surprise of 1.3%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Dollar General is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Dollar General has the right combination of two key components.
Zacks ESP: Dollar General currently has an Earnings ESP of +0.86%. This is because the Most Accurate estimate stands at $1.18, while the Zacks Consensus Estimate is pegged at $1.17.
Zacks Rank: Dollar General currently carries a Zacks Rank #3 (Hold).
Dollar General’s Zacks Rank #3 and ESP of +0.86% make us reasonably confident of a positive earnings beat.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
What is Driving the Better-than-Expected Earnings?
We believe that Dollar General’s commitment towards better price management, cost containment, private label offering, effective inventory management, merchandise and operational initiatives should have a favorable impact on the quarterly results. Moreover, in order to increase traffic, the company is focusing on both consumables and discretionary categories.
Other Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows that these have the right combination of elements:
The Men’s Wearhouse Inc. MW has an Earnings ESP of +57.14% and a Zacks Rank #2.
Genesco Inc. GCO has an Earnings ESP of +0.42% and a Zacks Rank #3.
Nike Inc. NKE has an Earnings ESP of +1.18% and a Zacks Rank #3.
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