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Macquarie On Dollar General: Well-Positioned With An Attractive Setup

Bob Summers of Macquarie Capital is bullish on Dollar General Corp. DG 0.31% ahead of its second quarter results.

According to Summers, Dollar General is expected to report a "strong" quarter given its "improving all-around execution" along with a favorable backdrop from a "choppy" economic environment. The analyst added that the dollar store chain should also demonstrate accelerating sales and "strengthening" same-store sales growth as management continues to build on its momentum.

Summers noted that strong cost controls will also yield further improvements in gross margins.

Summers is estimating the company will earn $1.08 per share in the second quarter, 2.7 percent same-store sales growth and an operating margin of 9.4 percent

Longer-Term View

Summers stated dollar stores, especially Dollar General, is best suited to outperform when the "economy turns and consumers begin to retrench while strong jobs growth at the lower end of the spectrum may act as a further tailwind."

In addition, Summers stated that despite Dollar General's already elevated valuations, the company's long-term growth profile is favorably based on its new unit growth and accelerating same-store sales and continued operational improvements.

Shares remain Outperform rated with an unchanged price target of $98.

DateFirmActionFromTo
Aug 2016JefferiesDowngradesBuyHold
Aug 2016Deutsche BankDowngradesBuyHold
Jul 2016Morgan StanleyMaintainsOverweight

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