On Wednesday, Evercore ISI analyst M. Michael Montani maintained an In Line rating with a $100.00 price target for Dollar General (NYSE:DG) shares, which currently trade at $86.85. According to InvestingPro analysis, the stock appears undervalued based on its proprietary Fair Value model. Montani expressed optimism about the company’s near-term performance, predicting a high single-digit to low double-digit increase in the stock price over the next month. This expectation is based on anticipated positive first-quarter earnings and a likely guidance update, which are expected to be announced on June 3rd before the market opens.
Montani highlighted Dollar General’s return to fundamental strategies, operational improvements, and potential for reduced shrinkage as key factors driving the company’s progress. According to Montani, these improvements, along with the sales momentum identified in Bloomberg’s second Measure data, suggest a modest upside to comparable store sales and earnings per share for the first quarter. Dollar General is believed to have achieved over 2% positive comparable store sales, surpassing the analyst’s previous estimate of a 1.2% increase.
The Evercore ISI analyst also noted that growing customer traffic, which remains positive even as Dollar General cycles against a strong first quarter in 2024, reflects better in-store execution, lower fuel prices, and potential market share gains from pharmacy closures and Family Dollar rationalization. As a result of these factors, Montani has increased his first-quarter EPS estimate for Dollar General to $1.52, which is above the Street’s consensus of $1.47.
Looking ahead to the second quarter, Montani expects the Street’s comparable sales outlook to improve to approximately 2.5% from the current 1.9%, potentially pushing second-quarter EPS from $1.58 towards $1.65 or higher. Furthermore, he believes that the consensus EPS forecasts for calendar years 2025 and 2026 of $5.57 and $6.15 are achievable if Dollar General maintains its focus on core operations and continues to benefit from trade-in dynamics from higher-income consumers.
Despite the positive short-term outlook, Montani cautioned that there are medium- to long-term concerns for Dollar General, including potential investments in store labor and wage rates, the need for more competitive pricing, a challenging consumer environment for low- to middle-income shoppers, and the unpredictable impact of tariffs, which could pose a significant EPS headwind. InvestingPro data shows the company maintains a healthy current ratio of 1.19 and has achieved a diluted EPS of $5.11 over the last twelve months, providing some cushion against these challenges. Subscribers can access the comprehensive Pro Research Report for Dollar General, which is part of InvestingPro’s coverage of over 1,400 US stocks, offering detailed analysis of these risk factors and growth opportunities.
In other recent news, Walmart (NYSE:WMT) Inc. has maintained its full-year financial outlook and achieved e-commerce profitability in the United States, as confirmed during its April Investor Day. Bernstein analysts have reiterated an Outperform rating on Walmart with a price target of $108, highlighting the company’s strategic focus on competitive pricing and market share expansion. This approach is expected to attract a broad range of customers, although it may impact short-term earnings. Meanwhile, Dollar General Corporation has experienced a series of mixed analyst ratings. CFRA downgraded Dollar General to Sell with a revised price target of $75 due to concerns over its vulnerability in a weakening economic environment and potential challenges in maintaining market share against competitors like Walmart. Conversely, Melius Research upgraded Dollar General to Buy, setting a new price target of $110, citing its attractive valuation and potential for future performance improvement. Moody’s has downgraded Dollar General’s senior unsecured notes to Baa3, reflecting decreased interest coverage and weakened operating margins amidst inflationary pressures. Additionally, Piper Sandler raised Dollar General’s price target to $81, maintaining a Neutral rating while acknowledging the company’s strategic initiatives aimed at achieving a 10% annual EPS growth by 2026.
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