Dollar General Earnings Preview: Winter Weather To Get The Blame Again?

-- which according to a recent study has taken the low-price lead from larger competitor

-- is scheduled to report its fiscal first-quarter 2014 results on Thursday, May 29, before the markets open. Last year, slightly lower debt and debt refinancing contributed to the gains in net income, while lower capital expenditures and asset sales contributed to the free cash flow gains. Investors will be keeping eye on where continued growth comes from. One analyst has already suggested sales for the quarter are likely to come in at low end of guidance

Analysts on average predict that Dollar General will report its revenue for the quarter rose almost eight percent year-over-year, coming in at $4.56 billion. Earnings of $0.73 per share are also in the consensus forecast. That would be up from a reported profit of $0.71 per share in the comparable period of last year. Analysts seem certain, as the earnings per share (EPS) estimate is unchanged in the past 60 days, and individual estimates only range from $0.72 to $0.74. Earnings results were in line with expectations in the fourth quarter, but they beat by a few pennies in the two periods before that. "Sales in the fourth quarter were impacted by severe winter weather, including many days with significant store closures, an aggressive competitive retail landscape and our customers' uncertainty about spending in the current economic environment," said the CEO in the fourth-quarter report. The share price pulled back marginally following the report.

Looking ahead, the EPS forecast for the three months that end in July so far calls for sequential and year-over-year growth on both the top and bottom lines. That consensus EPS estimate also is unchanged from 60 days ago. So far, growth near nine percent is expected for both EPS and revenue for the full year.

Dollar General is a discount retailer operating more than 11,000 stores in 40 states. The company bills itself as the nation's largest small-box discount retailer, offering popular brands at low everyday prices in small, convenient locations. The company came public in 2009 and now has a market capitalization near $17.5 billion. The company was founded in 1939, is based in Goodlettsville, Tennessee, and Richard W. Dreiling has been the chairman of the board and chief executive since 2008. Competitors include Dollar Tree, Family Dollar and Wal-Mart. Family Dollar's EPS are expected to have declined in the current quarter, and Dollar Tree narrowly exceeded analysts' EPS expectations in its most recent report. Wal-Mart offered disappointing quarterly results in mid-May.

During the three months that ended in April, Dollar General benefited from the tobacco ban at CVS Caremark stores, claimed an impact from Obamacare, announced cost cuts, sponsored a team in the Indianapolis 500 and donated $75,000 to the Red Cross. Also, the CEO sold $18 million worth of shares.

Dollar General has a long-term earnings per share growth forecast of more than 14 percent and its price-to-earnings (P/E) ratio is less than the industry average. Its return on equity is more than 19 percent, and the operating margin is greater than the industry average. It offers no dividend. The number of Dollar General shares sold short, as of the most recent settlement date, represents more than two percent of the float. That was after a rise in short interest of about nine percent from year-to-date low in the previous period. It would take more than two days to close out all of the short positions. Of the 24 analysts surveyed by Thomson/First Call who follow the stock, 14 recommend buying shares, with five of them rating the stock at Strong Buy. The analysts' mean price target, or where they expect the stock to go, is about 14 percent higher the current share price and would be a new multiyear high. At the close on Friday, the share price was more than 11 percent lower than the 52-week high hit early in the year. It is lower than both the 50-day and 200-day moving averages. Over the past six months, the stock has outperformed the competitors mentioned above, but it has underperformed the S&P 500.

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