Management raises fiscal 2017 guidance
Dollar Tree (DLTR) reported its third-quarter 2017 results on November 21. It revised its full-fiscal 2017 guidance for the third time this year. Management expects $22.20 billion to $22.31 billion in total sales compared to $22.07 billion–$22.28 billion guided last quarter and $21.95 billion–$22.25 billion projected earlier in the year.
At the mid-point, the revised guidance reflects a 7.4% growth in sales over fiscal 2016. A low single-digit increase in sales comps and a 3.7% growth in square footage are expected to drive growth.
Diluted earnings per share are expected to range between $4.64 and $4.73, compared to $4.40–$4.60 guided last quarter. This increase translates to a 23.9% growth at the mid-point.
Comparing DLTR’s valuations and earnings potential with Dollar General
Dollar Tree is currently trading at a one-year-forward price-to-earnings ratio of 19.2x, in line with its three-year average of 20.3x. The company is trading at a slight premium to competitor Dollar General (DG), which is valued at about 18.2x.
While the two discount store chains have similar valuations, Dollar Tree looks more appealing if we compare the near-term earnings potential. Its earnings per share are expected to rise 19.3% over the next 12 months. In comparison, Dollar General’s profits are projected to rise 5.6% over the same period. Dollar General plans to report third-quarter results on December 7.
Investors looking for exposure to Dollar Tree through ETFs can consider the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 1.23% of its total holdings in the company.
Read the next part of this series for a view on Dollar Tree’s stock market performance.