Dj Dollar General Corp. Stock Underperforms Tuesday When Compared To Competitors

The most recent trading session ended with Dollar General (DG) standing at $76.29, reflecting a -0.86% shift from the previouse trading day's closing. This change lagged the S&P 500's daily gain of 0.1%. On the other hand, the Dow registered a gain of 0.69%, and the technology-centric Nasdaq increased by 0.06%.

Heading into today, shares of the discount retailer had lost 6.72% over the past month, lagging the Retail-Wholesale sector's gain of 5.33% and the S&P 500's gain of 4.37% in that time.

The upcoming earnings release of Dollar General will be of great interest to investors. The company's earnings report is expected on December 5, 2024. On that day, Dollar General is projected to report earnings of $0.97 per share, which would represent a year-over-year decline of 23.02%. Our most recent consensus estimate is calling for quarterly revenue of $10.13 billion, up 4.54% from the year-ago period.

For the full year, the Zacks Consensus Estimates are projecting earnings of $5.86 per share and revenue of $40.51 billion, which would represent changes of -22.38% and +4.71%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for Dollar General. These revisions help to show the ever-changing nature of near-term business trends. Therefore, positive revisions in estimates convey analysts' confidence in the company's business performance and profit potential.

Empirical research indicates that these revisions in estimates have a direct correlation with impending stock price performance. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.

The Zacks Rank system, which varies between #1 (Strong Buy) and #5 (Strong Sell), carries an impressive track record of exceeding expectations, confirmed by external audits, with stocks at #1 delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.05% higher. Dollar General is currently a Zacks Rank #2 (Buy).

In the context of valuation, Dollar General is at present trading with a Forward P/E ratio of 13.13. This signifies a discount in comparison to the average Forward P/E of 20.11 for its industry.

Meanwhile, DG's PEG ratio is currently 2.25. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The average PEG ratio for the Retail - Discount Stores industry stood at 2.33 at the close of the market yesterday.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. Currently, this industry holds a Zacks Industry Rank of 33, positioning it in the top 14% of all 250+ industries.

The Zacks Industry Rank assesses the vigor of our specific industry groups by computing the average Zacks Rank of the individual stocks incorporated in the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to use Zacks.com to monitor all these stock-influencing metrics, and more, throughout the forthcoming trading sessions.

Zacks Investment Research

For Immediate Release

Chicago, IL –November 11, 2024 – Zacks Equity Research shares Target’s TGT, as the Bull of the Day and Hershey’s HSY, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Mission Produce, Inc. AVO, BGC Group, Inc. BGC and Nu Holdings Ltd. NU.

Here is a synopsis of all five stocks:

Bull of the Day:

Making significant progress in addressing inventory concerns, Target’s stock appears to be at a positive inflection point ahead of its Q3 results on Wednesday, November 20.

Sporting a Zacks Rank #1 (Strong Buy) and landing the Bull of the Day, let’s take a look at why investing in Target looks favorable again.

Targets Q3 Expectations

Based on Zacks estimates, Target’s Q3 sales are projected to increase 2% to $25.97 billion. On the bottom line, Q3 EPS is expected to rise 8% to $2.28 versus $2.10 per share in the comparative quarter.

Target most recently surpassed Q2 earnings expectations by nearly 19% in August with EPS at $2.57 compared to estimates of $2.16 a share. Notably, Target has surpassed the Zacks EPS Consensus in three of its last four quarterly reports posting an average earnings surprise of 20.26%.

Addressing Shrink Concerns

Target has been at the forefront of addressing shrink concerns as theft and damaged goods have affected many retailers in recent years. To that point, Walmart WMT, TJX Companies TJX , and Dollar General DG are some of the other notable names that have dealt with the dismal effects of shrink.

As reported by Yahoo Finance, Target has been a leader in increasing security measures by installing locking cases for items prone to theft while investing in additional security members and third-party training services.

Target also plans to partner with the US Department of Homeland Security to develop cyber defense technology in a bid to curb organized retail crime. These efforts have largely attributed to Target's increased probability considering shrink reduced its profit by an astonishing $1.2 billion in the last two years.

Tracking Targets Rebound & Valuation

Boosting investor sentiment by addressing its shrink issues, Target’s stock is up a modest +6% year to date but has now soared +37% over the last year. Edging the benchmark S&P 500’s one-year performance, Target has trailed Walmart’s +53% but has topped TJX’s +28% and Dollar General’s plummet of -34%.

Most intriguing, is that TGT trades at 15.4X forward earnings which is a pleasant discount to the S&P 500’s 25.1X and Walmart’s 34.2X.

Magnifying this perceived discount is that Target’s annual earnings are forecasted to increase 7% in its current fiscal 2025 and are projected to climb another 11% in FY26 to $10.56 per share.

It’s also noteworthy that TGT trades at just 0.6X sales with its top line expected to be virtually flat in FY25 but slated to increase 3% in FY26 to $110.27 billion.

Bottom Line

Correlating with Target’s strong buy rating is that earnings estimate revisions have remained higher for FY25 and FY26. The Average Zacks Price target of $177.28 a share suggests 20% upside in TGT with Target checking an overall “A” VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum.

Bear of the Day:

Reporting lackluster third quarter results on Thursday, there could be more downside risk ahead for Hershey’s stock.

To that point, the iconic chocolate manufacturer had already seen a decline in its earnings estimate revisions with HSY landing a Zacks Rank #5 (Strong Sell) and the Bear of the Day.

Hershey’s Dismal Q3 Results

Attributed to what it called a challenging consumer environment, Hershey’s Q3 sales of $2.98 billion dipped 1% from the comparative period and missed estimates of $3.07 billion by 3%.

Lower sales volumes curtailed Hershey’s profit with Q3 EPS of $2.34 dipping 10% from a year ago and missing expectations of $2.50 per share by 6%.

Furthermore, Hershey previously missed Q2 earnings and sales estimates in August with surprises of -12% and -10% respectively.

High Cocoa Prices

Causing more concern was Hershey’s acknowledgment that historically high cocoa prices are weighing on its operating efficiency as well. As the prime ingredient in producing chocolate, cocoa prices are still toward the high end of its 50-year range at over $7,000 per ton.

Declining EPS Estimates

Leading to the strong sell rating for Hershey’s stock, EPS estimates for fiscal 2024 and FY25 have continued to decline over the last 90 days. Unfortunately, the trend of declining earnings estimate revisions will likely continue as Hershey’s full-year FY24 EPS guidance of $9.00-$9.10 came in below the current Zacks Consensus of $9.39 per share.

Bottom Line

For now, it could be best to avoid Hershey’s stock as weaker snacking demand and high cocoa prices are starting to weigh on North America’s largest chocolate producer.

Hershey’s stock is now down -7% year to date and has dropped -25% in the last three years. Correlating with such, it’s noteworthy that Hershey’s Zacks Food-Confectionary Industry is currently in the bottom 5% of over 250 Zacks industries.

Additional content:

3 Strong Breakout Stocks to Add to Your Portfolio

Searching for stocks whose prices are fluctuating within a specific band, or in other words, picking breakout stocks, is an active investing approach. When selecting breakout stocks, it’s advised to sell if the price dips below the lower band and consider holding for potential gains if the price surpasses the upper band.

To that end, Mission Produce, Inc., BGC Group, Inc. and Nu Holdings Ltd. have been selected as the breakout stocks for today.

Zeroing in on Breakout Stocks

To select the right breakout stock, one has first to calculate its support and resistance level. A support level is the lower bound for stock movements, while a resistance level refers to the maximum price it trades within a considerable period.

In other words, the demand for a stock is at its lowest at its support level, which means that most traders are willing to sell it. Most traders are willing to go long on the stock at the resistance level, meaning they would like to add them to their portfolio. The key to identifying breakout stocks is to zero in on those on the verge of a breakout or those that have just broken above the resistance level.

Has a Genuine Breakout Occurred?

The primary risk associated with such a strategy is that the decision to buy an apparent breakout candidate has been incorrectly timed. When a stock moves above the resistance level, it should be a highly prized commodity for traders. However, whether such a breakout is genuine is another matter altogether.

For a bona fide breakout, the stock’s earlier resistance barrier should become its new support level. This only happens if the trading channel that has been established is tested by observing long-term price trends. The strength of the support and resistance levels can be ascertained only through such a study. Despite the risk of misidentification, correctly identifying such stocks can yield considerable returns, even at a price that may not seem attractive at first glance.

Screening Criteria Using Research Wizard:

• Percentage price change over four weeks between 10% and 20% (Stocks showing considerable price increases but whose gains are not excessive.)

• Current Price /52-Week High greater than or equal to 0.9 (Stocks trading 90% close to their 52-week highs.)

• Zacks Rank equal to #1 (Only Strong Buy rated stocks can get through.)

Whether the market is good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.

• Beta for 60 months less than or equal to 2

(Stocks that move more than the broader market but within a reasonable limit.)

• Current price less than or equal to $20 (Stocks reasonably priced.)

These criteria narrow the universe of more than 6,853 stocks to only nine. Here are the top three stocks:

Mission Produce

Mission Produce sources, produces, packs, distributes, and markets avocados in the United States and worldwide. AVO has an expected earnings growth rate of 136.8% for the current year.

BGC Group

BGC Group is a brokerage and financial technology company. BGC has an expected earnings growth rate of 20.7% for the current year.

Nu Holdings

Nu Holdings provides a digital banking and technology platform. NU has an expected earnings growth rate of 70.8% for the current year.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

Why Haven't You Looked at Zacks' Top Stocks?

Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.

Today you can access their live picks without cost or obligation.

See Stocks Free >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

https://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research

At its meeting, the Federal Reserve trimmed interest rates for the second time this year. This time, it cut key interest rates by 25 bps following the 50-bps cut in September 2024. This reflects the Fed's renewed focus on supporting the job market and fighting inflation. Moreover, Donald Trump's victory in the presidential election over Kamala Harris has had a substantial positive impact on the stock market. Trump’s re-election is expected to lead to a more pro-business stance, as was evident in his first term.

Investors would like to take advantage of these tailwinds and design a winning portfolio for healthy returns. Given the difficulty of this task as stocks from different industries are present in the market, investors are well-advised to take help from brokers, deemed to be experts in the field of investing. Broker-favorite stocks such as American Airlines AAL, Air Canada ACDVF, DXC Technology DXC, Dollar General DG, and McKesson Corporation MCK should be monitored for this purpose.

We have designed a screen to shortlist stocks based on improving broker recommendations and upward revisions in earnings estimates over the past four weeks. Also, since the price/sales ratio is a strong complementary valuation metric in the presence of broker information, it has been included. The price/sales ratio takes care of the company’s top line, making the strategy a well-rounded one.

Screening Criteria

# (Up- Down Rating)/ Total (4 weeks) =Top #75 (This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks).

% change in Q (1) est. (4 weeks) = Top #10 (This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter).

Price-to-Sales = Bot%10 (The lower the ratio, the better. Companies meeting this criterion are in the bottom 10% of our universe of over 7,700 stocks with respect to this ratio).

Price greater than 5 (as a stock trading below $5 will not likely create significant interest for most of the investors).

Average Daily Volume greater than 100,000 shares over the last 20 trading days (Volume has to be significant to ensure that these are easily traded).

Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of market capitalization).

Com/ADR/Canadian= Com (This takes out the ADR and Canadian stocks).

Here are five of the 10 stocks that made it through the screen:

American Airlines is based in Fort Worth, TX. The gradual increase in air travel demand (particularly leisure) aids AAL. However, high operating costs are hurting the bottom line.

Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has increased 36.8%. AAL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Air Canada, Canada’s leading airline, is benefiting from the buoyant scenario with respect to air travel demand. Driven by this tailwind, shares of this carrier have gained 49% in the past three months.

Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has gained 39.7%. ACDVF currently carries a Zacks Rank #3.

DXC Technology is benefiting from strength in the digital business and partnerships, which is helping it expand in the cloud computing space. DXC Technology is implementing robust cost-saving measures to enhance its financial performance.

Over the past 60 days, the Zacks Consensus Estimate for DXC’s next-year earnings has increased by 1.3%. DXC’s earnings surpassed estimates in each of the last four quarters. The average beat is 22.2%. The company currently carries a Zacks Rank #3.

Dollar General remains a compelling growth story in the retail space, despite immediate margin pressure and a tough consumer environment. Thanks to its value-creating initiatives, defensive product mix and real estate growth strategy, the company has the capabilities to gain market share.

DG’s commitment to better pricing, private label offerings, effective inventory management and merchandise initiative should drive sales. DG’s earnings surpassed estimates in three of the last four quarters (missing the mark in one). The average beat is 2.8%. The company currently carries a Zacks Rank #2 (Buy).

McKesson‘s growth is driven by the U.S. Pharmaceutical segment, which is seeing increased prescription volumes, including higher volumes from specialty products and retail national account customers.

McKesson is based in San Francisco, CA. MCK’s earnings surpassed estimates in three of the last four quarters (missing the mark in one). The average beat is 5%. The company currently carries a Zacks Rank #2.

You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance

Zacks Investment Research