UBS Remains Bullish on Dollar General (DG) Ahead of 2Q15 Results

UBS reiterated a Buy rating and $85.00 price target on Dollar General (NYSE: DG) ahead of the company's 2Q15 earnings release. Analyst Michael Lasser said that DG's profitability is likely to show another quarter of stabilization, and is forecasting 25 bps of GM expansion for 2Q driven by higher inventory markups, better shrink, and lower transportation costs. DG is scheduled to release its earnings on August 27th.

Lasser commented, "At this point, we think the simplicity and straightforward nature of DG's story is what's so compelling about it. So, an uneventful quarter of 3-4% comp growth, sound new store productivity, stable gross margin, and healthy share repurchases will support the bull case for the stock. We model a 3.5% comp est. for 2Q'15, which is slightly below the consensus forecast of 3.6%. Sales growth was likely driven by new store openings, incremental labor investments, and improved in-stock levels. Under its new management team, we believe that DG is poised to be more aggressive, and take bolder steps to maintain its competitiveness. This keeps the story attractive, in our view."

For an analyst ratings summary and ratings history on Dollar General click here. For more ratings news on Dollar General click here.

Shares of Dollar General closed at $74.67 yesterday.

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