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Why Dollar General’s Stock Price Rose after 4Q17 Earnings

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Why DG surged after 4Q17 results

As we’ve discussed throughout this series, Dollar General beat Wall Street earnings expectations and reported an improvement in its gross margin when it reported its fourth-quarter results on March 15. Though the company missed top-line forecasts, it beat same-store sales projections.

Investors appeared quite pleased with the discount retailer’s quarterly results, which reflected in its stock market performance. The stock rose 4.7% on March 15.

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Also boosting the stock price was the company’s upbeat guidance. Management is looking at $5.95 and $6.15 per share in fiscal 2018 earnings, well above the $5.58 per share analyst estimate. Dollar General has forecasted a 9% jump in sales to $25.58 billion versus the $25.44 billion consensus. Management anticipates a tax benefit of ~$300 million in fiscal 2018.

Dollar General’s performance is particularly impressive compared to other retailers this earnings season. Competitor Dollar Tree (DLTR) witnessed a 14.5% fall in stock price after missing both its top and bottom lines as well as issuing disappointing guidance.

Retail giant Walmart (WMT) also saw one of its largest intra-day stock price declines after reporting disappointed online sales and glum guidance.

YTD stock market performance

Dollar General’s 4Q17 results were able to stop the slide in DG’s stock price and turn its YTD (year-to-date) losses into mild gains. The company is now sitting at a YTD gain of 0.5%. In comparison, Dollar Tree (DLTR), Walmart (WMT), and Kroger (KR) are sitting at YTD losses of 12%, 11.4%, and 14%, respectively.

DG also enhanced its stock repurchase plan by $1 billion and increased its cash dividend by 12% during the quarter.

Investors looking for exposure to Dollar General through ETFs can consider the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which invests 1.2% of its total holdings in the company.

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