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No Bang for Buck: Dollar General Beats, Stock Slumps

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Part 6
No Bang for Buck: Dollar General Beats, Stock Slumps PART 6 OF 6

Understanding Dollar General’s Analyst Ratings after the Fiscal 2Q17 Results

Recent analyst action on Dollar General

While Wall Street analysts have reaffirmed their former ratings after Dollar General’s (DG) fiscal 2Q17 results, many of them seemed concerned about the company’s narrowing margins.

According to Retail Dive, Neil Saunders of GlobalData stated: “Over the last year, operating profit fell by 3.1%, while net income dipped by 3.8%. This is an outcome we hinted at last quarter and, in our view, it underlines the fact that Dollar General is now coming into a period of slimmer returns.”

Understanding Dollar General’s Analyst Ratings after the Fiscal 2Q17 Results

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According to Bloomberg, Gordon Haskett analyst Chuck Grom stated that “The report wasn’t flawless.” Grom added that Dollar General is “more glass empty today than at any point in our 12+ year tenure covering the group.”

Target price revision

Telsey Advisory and Jefferies both revised their Dollar General price targets after the 2Q results. Telsey Advisory Group raised the target price from $75 to $77, while maintaining its “market perform” rating. Jefferies raised price target to $73 from $68 but kept its “hold” rating unchanged.

Wall Street has set an average price target of $81.74 for Dollar General stock. This reflects an upside of ~13% over the next 12 months.

Broader view of the Wall Street on DG

Currently, 29 Wall Street analysts are rating Dollar General stock. DG has received a rating of 2.4 on a scale of 1.0 (“strong buy”) to 5.0 (“strong sell”). These ratings are in line with retail competitors.

By comparison, Dollar Tree (DLTR), Price Smart (PSMT), and TJX Companies (TJX) are rated 2.3, 2.3 and 2.1, respectively. Big box retailers Wal-Mart Stores (WMT) and Costco Wholesale (COST) are rated 2.5 and 2.1, respectively, while supermarkets Kroger (KR) and Supervalu (SVU) are rated 2.6 and 2.4, respectively.

Wall Street recommendations

Notably, 52% of the analysts tracking Dollar General stock now recommend a “hold,” while 45% suggest a “buy.” Only 3% analysts have a “sell” rating on the stock.

Investors looking for exposure to Dollar General through ETFs can consider the ProShares DJ Brookfield Global Infrastructure ETF (TOLZ), which invests 3.4% of its total holdings in DG.

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