UPDATE: Bank of America Upgrades Dollar General Corp. to Buy, Raises PT on Positive Catalysts Ahead

In a report published Monday, Bank of America analyst Denise Chai upgraded the rating on Dollar General Corp.

from Neutral to Buy, and raised the price target from $55.00 to $60.00. In the report, Chai noted, “We are upgrading Dollar General to Buy from Neutral and raising our PO to $60 from $55, representing 18x 2013 P/E (16x 2013 prior), while maintaining our above-guidance 2014E EPS of $3.35. With DG's recent credit rating upgrade, debt refinancing and near lifting of the private equity overhang, we expect sentiment toward the name to continue to strengthen, particularly as DG outperforms Family Dollar on comps, margins and EPS growth over the coming quarters. By June, DG expects to complete the roll out of tobacco. Given the very low margins on this category (~10% GM), we expect marketing to be minimal and thus ramp up to be gradual. Also, while apparel continues to decline slightly, the growth rate gap between apparel and consumables has narrowed significantly (990bp in 1Q12 to 370bp in 4Q12) as improved assortments have gained traction.” Dollar General Corp. closed on Friday at $52.49.