Dollar Tree Q3 Earnings to Reflect Improved Traffic: Should You Buy?

Dollar Tree, Inc. DLTR is likely to register top and bottom-line growth when it reports third-quarter fiscal 2024 results on Dec. 4. The Zacks Consensus Estimate for revenues is pegged at $7.5 billion, indicating an improvement of 1.9% from the prior-year quarter’s figure.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at $1.07 per share, indicating growth of 10.3% from the year-ago period’s figure. The consensus mark has moved up a penny in the past 30 days. The company has a trailing four-quarter negative earnings surprise of 10.9%, on average. In the last reported quarter, the Chesapeake, VA-based company reported an earnings miss of 35%.As investors prepare for Dollar Tree’s fiscal third-quarter earnings, the question emerges regarding earnings beat or miss.Zacks Model Findings for Dollar TreeOur proven model conclusively predicts an earnings beat for Dollar Tree this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +2.80%.Trends to Watch Before Dollar Tree’s Big RevealDollar Tree’s fiscal third-quarter results are expected to reflect continued pressures from soft demand for discretionary items owing to reduced spending trends among low-income consumers, mainly in its Family Dollar business. The lower-income customers at Family Dollar have been especially pressured by reductions in government SNAP benefits. The persistence of this trend is expected to have affected comparable sales (comps) and sales performance for the Family Dollar segment in the to-be-reported quarter.High shrink levels across Family Dollar and Dollar Tree have been a key concern for the company. On the last reported quarter’s earnings call, management noted signs of stabilization, supported by targeted actions. Shrink at Family Dollar is reportedly ahead of expectations, but Dollar Tree faces additional challenges as it adapts to new shrink dynamics associated with introducing higher-value, multi-price products. The elevated shrink levels are expected to have hurt results in the to-be-reported quarter.The company has been facing headwinds related to product cost inflation and unfavorable sales mix. These factors are expected to have collectively marred the top and bottom lines in the fiscal third quarter.On the last reported quarter’s earnings call, management provided conservative sales guidance for the Dollar Tree segment for the rest of the fiscal year. The company also noted that its guidance includes incremental start-up expenses related to the conversion of the leases of its acquired portfolio of 99 Cents Only Stores.Dollar Tree has also been witnessing higher SG&A expenses for the past few quarters, owing to elevated operating costs, including labor investments to support multi-price rollouts, higher depreciation expenses and costs related to severance and retention of store closures in the Family Dollar segment.As a percentage of sales, we expect adjusted SG&A expenses to increase 60 basis points year over year to 26.3% in the fiscal third quarter. In dollar terms, SG&A expenses are anticipated to increase 4.5% year over year.Dollar Tree, Inc. Price and EPS Surprise Dollar Tree, Inc. price-eps-surprise | Dollar Tree, Inc. QuoteHowever, DLTR is expected to have displayed continued progress on its restructuring and expansion initiatives, driven by steady store openings and improvement of distribution centers, which is likely to have partly cushioned revenues. The company has been benefiting from various initiatives like a multi-price point strategy, restructuring and expansion initiatives and efforts to optimize its store portfolio through store openings, renovations, re-banners and closings. These actions have led to consistent sales growth across various segments and gains in market share.DLTR’s digital and omnichannel capabilities and same-day delivery service with Instacart are expected to have driven traffic trends in the fiscal third quarter. Higher traffic trends and market share gains are expected to have bolstered comps performance in the to-be-reported quarter.For the fiscal third quarter, management projects consolidated net sales of $7.4-$7.6 billion. Comps are expected to increase in the low-single-digits for the enterprise and both the Dollar Tree and Family Dollar segments. Adjusted EPS is expected to be $1.05-$1.15. The EPS guidance includes 7 cents of incremental upfront costs, related to the acquisition and re-opening of the acquired 99 Cents Only Stores leases, and 6 cents of incremental depreciation and amortization expense due to increased project costs.Our model predicts year-over-year enterprise comps growth of 2.4% for the fiscal third quarter, with a 2.7% increase in comps for the Dollar Tree banner and a 1.9% rise in Family Dollar comps.Driven by a 90-bps increase in the gross margin and a higher SG&A rate, our model predicts an adjusted operating margin of 4.4%, indicating a 30-bps expansion from the year-ago quarter.DLTR’s Stock Price & Valuation PictureFrom a valuation perspective, Dollar Tree’s shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 12.07X, below the five-year median of 17.95X and the Retail-Discount Stores industry’s average of 31.49X, the company’s shares offer compelling value for investors seeking exposure to the sector. Additionally, the stock currently has a Value Score of A, further validating its appeal.Recent market movements show that Dollar Tree’s shares have lost 49.7% year to date against the industry’s 25.7% growth.Image Source: Zacks Investment ResearchOther Stocks With the Favorable CombinationHere are some companies, which according to our model, also have the right combination of elements to post an earnings beat this season:Torrid Holdings CURV presently has an Earnings ESP of +23.08% and a Zacks Rank 2. The company is expected to register growth in the top and bottom lines when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for CURV’s quarterly revenues is pegged at $282.8 million, which indicates 2.7% growth from the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus mark for CURV’s quarterly earnings has moved up by a penny in the past seven days to 3 cents per share. The consensus estimate indicates growth of 200% from the year-ago quarter.Casey's General Stores CASY currently has an Earnings ESP of +1.50% and a Zacks Rank of 3. The company is expected to register top-line growth when it reports third-quarter fiscal 2024 results. The consensus mark for CASY’s quarterly revenues is pegged at $4 billion, which indicates a decline of 1.4% from the prior-year quarter.The Zacks Consensus Estimate for CASY’s earnings has moved down 0.9% to $4.24 per share in the past seven days. This indicates that the consensus estimate is expected to be flat with the year-ago quarter’s figure.Five Below FIVE currently has an Earnings ESP of +19.73% and a Zacks Rank of 3. The company is likely to register top-line growth when it reports third-quarter fiscal 2024 results. The consensus mark for FIVE’s quarterly revenues is pegged at $799.2 million, which indicates growth of 8.5% from the prior-year quarter.The Zacks Consensus Estimate for Five Below’s earnings has moved up by a penny to 16 cents per share in the past 30 days. The consensus estimate indicates a decline of 38.5% from the year-ago quarter.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dollar Tree, Inc. (DLTR): Free Stock Analysis Report Casey's General Stores, Inc. (CASY): Free Stock Analysis Report Five Below, Inc. (FIVE): Free Stock Analysis Report Torrid Holdings Inc. (CURV): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks