Factors to Watch Ahead of Dollar Tree's (DLTR) Q2 Earnings

Dollar Tree, Inc.DLTR is slated to release second-quarter fiscal 2017 results on Aug 24. The question lingering in investors' minds is whether this discount store retailer will be able to post a positive earnings surprise in the quarter to be reported.

While Dollar Tree delivered a negative earnings surprise in the last reported quarter, the company has outperformed the Zacks Consensus Estimate by an average of 1.5% in the trailing four quarters. So let's see how things are shaping up prior to this announcement.

Dollar Tree, Inc. Price and EPS Surprise

Dollar Tree, Inc. Price and EPS Surprise | Dollar Tree, Inc. Quote

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at 87 cents, compared with 72 cents reported in the year-ago period. We note that the Zacks Consensus estimate has remained stable over the last 30 days. Further, analysts polled by Zacks expect revenues of roughly $5.2 billion, up 4.7% from the year-ago quarter.

Factors at Play

While Dollar Tree's bottom-line fell a penny short of the Zacks Consensus Estimate in the last reported quarter, both top and bottom-lines improved year over year. In fact, Dollar Tree's results have been witnessing year-over-year growth for quite some time now. The company has been gaining from its long- growth initiatives like store expansion and productivity enhancement, tapping of new markets and adding innovative sales channels to serve its patrons better.

Further, the company is well on track with Family Dollar's integration and is undertaking expansion efforts for both Dollar Tree and Family Dollar. The company's strategic investments in technological advancements also reflect promise. Notably, these factors helped Dollar Tree to post its 37th straight quarter of comps improvement in the last reported quarter.

However, sales in the last reported quarter were somewhat impacted by reduced SNAP benefits, which may hamper performance this time too. Also, top-line growth remains vulnerable to stiff competition from biggies, mainly on grounds of pricing. Further, management's lowered earnings view for fiscal 2017 raises concerns.

As for the second quarter, consolidated sales are projected in the range of $5.18-$5.28 billion, based on comps growth of range between slightly positive to low single-digit increase for the combined entity. While Dollar Tree's shares have declined 5.5% in the last six months, it fared better than the industry 's 10.2% decline. All said, we prefer to wait and see what's in store for Dollar Tree this time.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Dollar Tree is likely to beat earnings estimates this quarter. This 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. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Dollar Tree currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company has an Earnings ESP of -0.29%. The combination of Dollar Tree's Zacks Rank #3 and negative ESP makes surprise prediction difficult.

Stocks with Favorable Combination

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

Burlington Stores, Inc. BURL has an Earnings ESP of +3.23% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Big Lots, Inc. BIG has an Earnings ESP of +0.72% and a Zacks Rank #2.

Ollie's Bargain Outlet Holdings, Inc. OLLI has an Earnings ESP of +1.35% and a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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