Telsey maintains dollar general stock rating after earnings beat

On Tuesday, Telsey analysts reiterated a Market Perform rating for Dollar General stock (NYSE: NYSE:DG) following the company’s better-than-expected first-quarter earnings. Dollar General reported adjusted earnings per share (EPS) of $1.78, surpassing both Telsey’s estimate of $1.49 and the FactSet consensus of $1.48. According to InvestingPro data, 11 analysts have recently revised their earnings estimates upward for the upcoming period, suggesting growing confidence in the company’s near-term prospects.

The company’s total sales for the first quarter rose 5.3% to $10.4 billion, with comparable sales increasing by 2.4%. This growth was driven by a 2.7% rise in the average ticket, although traffic decreased slightly by 0.3%. Sales in the seasonal category increased 6.2% to $1 billion, home products rose 5.9% to $507,000, consumables climbed 5.2% to $8.6 billion, and apparel sales grew 3.2% to $269,000. The company’s revenue growth remains solid, with InvestingPro showing a 4.96% increase in the last twelve months and an impressive 30% year-to-date stock return.

Dollar General’s operating margin remained stable at 5.5%, compared to Telsey’s estimate of 4.8% and FactSet’s 4.7%. The company benefited from a gross margin expansion of 78 basis points to 31%, aided by lower shrink and higher inventory markups, though this was partially offset by increased markdowns.

The SG&A expense ratio increased by 77 basis points to 25.4%, mainly due to higher costs associated with retail labor, incentive compensation, and repairs and maintenance. Despite these expenses, EBIT dollars rose by 5.5% to $576 million, reflecting the company’s improved financial performance.

Telsey maintained a price target of $100.00 for Dollar General stock, emphasizing the company’s strong first-quarter results despite previously lowered expectations. Based on InvestingPro’s Fair Value analysis, Dollar General appears slightly undervalued at current levels. With a market capitalization of $21.37 billion and strong fundamentals including a healthy current ratio of 1.19, the company shows promising potential. For deeper insights into Dollar General’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

In other recent news, Dollar General reported first-quarter earnings per share that exceeded expectations, driven by balanced same-store sales and effective management of expenses. The company modestly raised its earnings per share guidance for fiscal year 2026, reflecting its strong performance. Barclays (LON:BARC) analysts reiterated an Overweight rating on Dollar General, citing positive sales and gross margin figures, and set a $100 price target. Jefferies also maintained a Buy rating, highlighting the company’s robust first-quarter results and increased sales outlook. Truist Securities kept a Hold rating with a $93 target, noting broad-based sales growth but expressing concerns about declining traffic. Telsey Advisory Group raised its price target to $100, emphasizing the benefits from store remodels and product assortment updates. Despite these positive developments, analysts noted potential challenges from tariffs and competition from other retailers.

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