Will Dollar Tree (DLTR) Beat Earnings this Quarter? - Analyst Blog

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We expect the operator of discount variety stores Dollar Tree Inc. ( DLTR ) to beat expectations when it reports second-quarter 2014 results on Aug 21.

Why a Likely Positive Surprise?

Our proven model shows that Dollar Tree may beat earnings because it has the right combination of two key components.

Positive Zacks ESP: Dollar Tree currently has an Earnings ESP of +7.69%. This is because the Most Accurate estimate stands at 70 cents per share, while the Zacks Consensus Estimate is pegged at 65 cents.

Zacks Rank #3 (Hold): Note that stocks with a Zacks Rank #1, 2 and 3 have a higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Dollar Tree's Zacks Rank #3 and Earnings ESP of +7.69% makes us confident of a positive earnings beat.

What's Driving Better-than-Expected Earnings?

Dollar Tree is one of the best-positioned dollar store concepts, especially with its evolving multi-price point chain. We believe that the company is doing a commendable job internally in managing controllable inputs, including reducing stem miles, while increasing back-haul opportunities at the same time.

We believe the company is now on a positive track after posting in-line earnings in the first quarter of 2014, breaking the negative surprise trend of the previous three quarters. This view is further made strong by the company's encouraging guidance for the second quarter and full year 2014.

For the second quarter of fiscal 2014, Dollar Tree expects total sales to be in the range of $1.97-$2.02 billion on the back of low single-digit comps growth. Further, the company anticipates earnings in the range of 58-64 cents per share in the upcoming quarter.

For fiscal 2014, the company anticipates sales of $8.37-$8.54 billion with low single-digit comps growth and earnings in the range of $2.94-$3.12 per share.

Further, the company is progressing well with its growth endeavors, including store expansion strategies, omni-channel growth, revamping of store formats and venturing into new markets. We commend its strategic investments toward incorporation of technological advances focused on boosting its top and bottom line in the long run.

Other Stocks to Consider

Dollar Tree is not the only firm looking up this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:

Abercrombie & Fitch Co. ( ANF ) has an Earnings ESP of +10.00% and a Zacks Rank #2 (Buy).

GameStop Corp. ( GME ) has an Earnings ESP of +5.26% and a Zacks Rank #3.

Aeropostale Inc. ( ARO ) has an Earnings ESP of +17.86% and a Zacks Rank #3.

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DOLLAR TREE INC (DLTR): Free Stock Analysis Report

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GAMESTOP CORP (GME): 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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