Things You Must Know Before Dollar Tree's (DLTR) Q4 Earnings

Dollar Tree, Inc. (NASDAQ:DLTR) is slated to release fourth-quarter fiscal 2019 results on Mar 4. We note that the company has trailing four-quarter positive earnings surprise of 1.2%, on average.

The Zacks Consensus Estimate for the company’s fiscal fourth-quarter earnings is pegged at $1.75 per share, which indicates 9.3% decline from the figure reported in the year-ago quarter. Notably, the consensus mark has moved down by a penny in the past 30 days. The Zacks Consensus Estimate for revenues is pegged at $6.39 billion, which calls for 3% growth from the prior-year quarter’s reported number.

For fiscal 2019, the Zacks Consensus Estimate is pegged at $4.72 per share that suggests a decline of 13.4% from the year-ago quarter’s figure. The consensus mark for fiscal 2019 sales is pegged at $23.69 billion.

Key Factors to Note

Dollar Tree has been grappling with soft margin trend due to higher costs. Increased freight costs as well as higher sales of low-margin consumable merchandise and shrink in the Family Dollar segment have been putting pressure on gross margin. Additionally, higher SG&A costs have been affecting the company’s operating margin.

Per the last earnings call, incremental pressure on merchandise margin stemming from rise in lower-margin consumables along with higher payroll costs in distribution centers are likely to have put pressure on Dollar Tree’s performance in fiscal fourth quarter. Also, increased expenses related to repairs and maintenance, utilities and depreciation are likely to have affected performance in the to-be-reported quarter.

The company projects net sales in the band of $6.33-$6.44 billion in fiscal fourth quarter. Further, it expects earnings per share, including tariff costs, in the range of $1.70-$1.80 for the quarter to be reported. For fiscal 2019, Dollar Tree projects consolidated net sales in the range of $23.62-$23.74 billion. Further, management anticipates earnings of $4.66-$4.76 per share in the same time frame.

Markedly, the company boasts a robust same-store sales (comps) trend that reflects strength in Dollar Tree and Family Dollar banners as well as increases in traffic and average ticket. A competitive pricing and store expansion plans, including remodeling and relocations, have been aiding the company’s comps. Notably, the company anticipates low-single-digit comps growth each, in the fourth quarter and fiscal 2019.

Additionally, Dollar Tree has been benefiting from efforts to provide a hassle-free shopping experience to customers. Initiatives like the Dollar Tree Plus! test and store-optimization efforts have been aiding the company’s performance. Restructuring and expansion initiatives, as evident from steady store openings and improvement of distribution centers, bode well.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Dollar Tree this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dollar Tree carries a Zacks Rank #3 and has an Earnings ESP of +0.32%.

Other Stocks With Favorable Combination

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

Costco Wholesale (NASDAQ:COST) has an Earnings ESP of +0.20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Casey's General (NASDAQ:CASY) has an Earnings ESP of + 3.45% and a Zacks Rank #3.

RH (NYSE:RH) has an Earnings ESP of +1.61% and a Zacks Rank #3.

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