Investing.com -- Evercore ISI has added Dollar General (NYSE:DG) to its Outperform Tactical and Action Positioning Call List.
In a note to clients on Wednesday, the firm pointed to improving fundamentals and a potential earnings beat when the company reports first-quarter results on June 3.
Evercore ISI said Dollar General is showing early signs of a successful turnaround, driven by “back to basics focus, improved processes, and potential for lower shrink.”
The firm pointed to “sales momentum identified in our 2nd Measure data on Bloomberg,” suggesting upside to first-quarter comparable sales and earnings per share.
“Dollar General appears to be driving turnaround traction evidenced by 1Q comp sales that we believe are likely positive 2%+ vs. our prior outlook of up 1.2,” the analysts wrote.
Evercore also raised its first-quarter EPS estimate to $1.52, above the Street’s consensus of $1.47, and projected an additional $100 million in revenue with a 20% flow-through rate.
Traffic trends are said to be improving, according to Evercore’s analysis, driven by “improved in-store execution, lower fuel prices, and potential share gain from pharmacy closures and/or Family Dollar rationalization.”
Looking ahead, the firm sees room for further upside. “We anticipate that DG can win some multiple expansion from 14x toward a range of 15-17x, which implies a near-term trading range of approximately $95-100 for the stock.”
Evercore also sees second-quarter EPS potentially rising from $1.58 to $1.65+, with comp sales likely reaching 2.5% versus the current consensus of 1.9%.
While the firm acknowledged longer-term concerns — including pricing gaps versus Walmart (NYSE:WMT), labor cost pressures, and tariffs — it believes Dollar General’s earnings potential in 2025 and 2026 is “attainable, so long as back to basics execution persists.”