Credit Suisse Downgrades Dollar General (DG) to Neutral
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Credit Suisse downgraded Dollar General (NYSE: DG) from Outperform to Neutral with a price target of $80.00 (from $95.00) on weak outlook as headwinds intensify.
Analyst Edward Kelly commented, ": DG's impressive stock run looks to be over sooner than we anticipated, as Q2 results signal a material deceleration in earnings momentum. Bottom line performance was only a touch below consensus, but a comp miss (+0.7% vs. a consensus of +2.7%) on negative traffic was a clear disappointment. A solid gross margin, expense control and lower tax rate made up for most of the shortfall. The company highlighted weather, food deflation, and SNAP as the largest top line issues, but commentary about intensifying competition from other staples players (likely includes WMT) was notable and its clear underlying business momentum has slowed. Visibility on a reacceleration is low in our view, even with the company poised to react with its own price cuts. This development adds to the recently introduced incremental wage pressure from new overtime rules, and combined now creates visible downside risk to forward consensus estimates. We expect these headwinds to weigh on the stock, making Outperformance to the staples group unlikely. We lowered our target price to $80 from $95."
Shares of Dollar General closed at $91.79 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst EPS View, Analyst PT Change, Downgrades
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