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Will Dollar General (DG) Surprise this Earnings Season? - Analyst Blog

Dollar General Corporation ( DG ), one of the largest discount retailers, is slated to report third-quarter fiscal 2014 results on Dec 4. In the last quarter, it had posted in-line results with both the reported earnings and the Zacks Consensus Estimate coming in at 83 cents. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

We believe that Dollar General's commitment toward better price management, cost containment, private-label offering, effective inventory management, merchandise and operational initiatives should drive sales. However, we remain concerned about the increasing gross margin pressure due to the rise in sales of low-margin products.

Earnings Whispers?

Our proven model does not conclusively show that Dollar General 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, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Dollar General is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 80 cents.

Zacks Rank: Dollar General carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

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.

Stocks that Warrant a Look

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

Nike, Inc. ( NKE ) has an Earnings ESP of +1.45% and a Zacks Rank #2 (Buy).

Casey's General Stores, Inc. ( CASY ) has an Earnings ESP of +6.25% and a Zacks Rank #2.

Carnival Corporation ( CCL ) has an Earnings ESP of +21.05% and a Zacks Rank #2.

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DOLLAR GENERAL (DG): Free Stock Analysis Report

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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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