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Friday, Dollar General Corporation (NYSE:DG), currently trading at $77.87 with a market capitalization of $17.15 billion, received a reaffirmed Sector Weight stock rating from KeyBanc, following the release of the company’s recent financial performance. Bradley Thomas, a KeyBanc analyst, acknowledged that Dollar General reported results that were slightly above expectations, with revenue growth of 2.9% year-over-year, even in a challenging market environment. According to InvestingPro analysis, the company appears undervalued based on its Fair Value estimate.
The company’s management has provided an optimistic Long-Term Financial Framework. This framework forecasts over 10% growth in earnings per share (EPS) starting in 2026, though InvestingPro data indicates net income is expected to decline this year. Additionally, it anticipates a rebound in operating margins to between 6.0% and 7.0%, up from 4.8% in 2024, compared to the current gross profit margin of 29.6%. The expected improvement in margins is attributed to reductions in shrinkage and inventory damages. Furthermore, the expansion of the DG Media Network and an increase in the mix of non-consumable products are set to contribute to the company’s growth.
Despite Dollar General’s position as a leading entity in the dollar store sector and its significant potential for upside, with analyst price targets ranging from $69 to $115, KeyBanc’s analysis suggests that there are considerable near-term (NT) challenges ahead for both consumers and the dollar store landscape in 2025. These headwinds are a factor in KeyBanc’s decision to maintain the current stock rating, aligning with the overall analyst consensus recommendation of 2.53 (between Hold and Buy).
The company’s forward-looking statements outline strategic initiatives to enhance performance and shareholder value over the coming years. This includes efforts to improve operational efficiency and diversify the product mix, which could bolster Dollar General’s market position.
In conclusion, while Dollar General’s recent performance has been better than expected and its long-term outlook appears promising, KeyBanc has opted to keep its stock rating unchanged due to potential near-term challenges facing the sector. The company’s strategic plans and projected financial improvements starting in 2026 have been noted as positive developments.
In other recent news, Dollar General reported its fourth-quarter 2025 earnings, exceeding market expectations with an earnings per share (EPS) of $1.68, higher than the forecasted $1.50. The company’s revenue reached $10.3 billion, slightly surpassing the anticipated $10.26 billion, marking a 4.5% year-over-year increase. Raymond (NSE:RYMD) James maintained an Outperform rating for Dollar General, citing the robust earnings performance, while Jefferies raised the stock’s price target to $92, acknowledging potential for sales growth and operating margin improvement. However, Truist Securities and CFRA both adjusted their price targets downward to $76 and $84, respectively, reflecting concerns over margin pressures and the company’s guidance for 2025, which fell short of some analyst predictions.
Despite these mixed analyst views, Dollar General’s management provided a cautious yet optimistic outlook for the medium to long term, aiming for operating margins of 6-7% by 2028-2029 and a return to 10% or higher EPS growth starting in 2026. The company plans to close 96 Dollar General stores and 45 pOpshelf stores in early fiscal 2026, representing less than 1% of its total store base, while also opening 575 new stores during the same period. This strategic move is part of Dollar General’s broader initiative to optimize its store portfolio and strengthen its foundation for future growth. Additionally, Dollar General aims to expand its delivery services significantly by the end of 2025, further bolstering its competitive edge in rural and small-town markets.
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