Why Analysts Became Much More Bullish on Dollar General

March 13, 2016 by Paul Ausick

Dollar General Corp. (NYSE: DG) made our list of stocks to own for the next decade on the strength of its sales growth, low costs and dividend payment. Its main rival, Dollar Tree Inc. (NASDAQ: DLTR), was near completion of its acquisition of Family Dollar Stores, and the company’s stock bounced around with Dollar General’s until last Wednesday, when Dollar General shares jumped more than 10% after reporting $1.30 in earnings per share (EPS) and $5.29 billion in revenue, well above consensus estimates calling for EPS of $1.17 and revenues of $4.94 billion.

Dollar General also boosted its annual dividend from $0.88 per share to $1.00 per share. Dollar Tree does not pay a dividend, and its shares dipped after fourth-quarter results failed to live up to expectations. And though neither store is near in size to Wal-Mart Stores Inc. (NYSE: WMT), Dollar General is outperforming the mega-retailer while Dollar Tree is trailing it in share price gains.

Analysts have noticed the solid performance at Dollar General and many have raised price targets recently:

  • Barclays raised its price target from $76 to $79 with an Equal Weight rating.
  • BMO boosted its price target from $85 to $95.
  • Jefferies upped its price target from $81 to $96 and rates the stock a Buy.
  • Raymond James also raised its price target from $85 to $95.
  • UBS has Buy lifted its price target from $82 to $93.

Dollar General stock closed at $85.01 on Friday, after posting a new 52-week high of $85.05. The stock’s 52-week low is $59.75, and the consensus price target is $86.70, although recent changes may not yet be figured in. The high price target is $95 and the low target is $79.