Earnings Previews: Dollar General, Kroger

The three major U.S. equity indexes closed lower on Monday. The Dow Jones industrials ended the day down 1.45%, the S&P 500 closed 1.54% lower and the Nasdaq retreated 1.58%. All 11 sectors closed lower, with real estate (−2.8%) and energy (−2.74%) falling the most. Consumer staples and cyclicals (−0.31% and −0.6%, respectively) posted the smallest losses.
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The Conference Board’s Consumer Confidence Index is due Tuesday morning. The consensus November estimate calls for a reading of 100.0, down from 102.5 in October. On Wednesday, the U.S. Energy Information Administration releases its weekly report on the country’s petroleum inventories. But the big economic events come later, with the weekly report on claims for unemployment benefits and the October report on personal consumption expenditures (PCE) on Thursday, and the nonfarm payrolls report for November due Friday.

The three major indexes traded mixed in the first half hour of regular trading Tuesday.
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China’s leading online entertainment platform for children and teens, Bilibili, reported quarterly results before markets opened on Tuesday that we better than analysts expected. The adjusted loss per share was smaller by more than 4%, and revenue was higher by about 2.4%. Year over year, revenue was up 11.3%, but the per-share loss was larger this year. The company issued downside guidance for the current quarter, but investors reacted more favorably, boosting the share price by more than 20% early Tuesday.

CrowdStrike and Hewlett Packard Enterprise are set to report quarterly results after U.S. markets close Tuesday, and Frontline, KE Holdings and Nordic American Tankers will share their quarterly results first thing Wednesday morning. Later on Wednesday, Okta, Pure Storage, Salesforce and Snowflake are on deck to report quarterly earnings.

Here is a preview of three companies set to report quarterly results before Thursday’s opening bell.
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Dollar General

Shares of Dollar General Corp. (NYSE: DG | DG Price Prediction) have risen by more than 12% over the past 12 months. Rival Dollar Tree is up about 4.5% in the same period, after taking a major tumble when it reported quarterly results just over a week ago and warned that inflation could lower revenue expectations. Dollar General got smacked in sympathy, but the drop was not as sharp. What the company has to say about the fiscal year ending in January probably will determine how investors react to Thursday’s report.

Analysts remain mostly bullish on the stock. Of 26 brokerages covering the off-price retailer, 19 have rated the stock at Buy or Strong Buy, and six more have Hold ratings. At a recent price of around $250.60 a share, the upside potential based on a median price target of $273.00 is 8.9%. At the high price target of $296.00, the upside potential is 18.1%.
Dollar General’s third-quarter revenue is forecast at $9.43 billion, which would be flat sequentially and up 10.7% year over year. Adjusted earnings per share (EPS) are forecast at $2.54, down 14.7% sequentially but 22.1% higher year over year. For the full 2023 fiscal year ending in January, Dollar General is expected to report EPS of $11.58, up 13.9%, on sales of $37.92 billion, up 10.8%.
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Its shares trade at 21.6 times expected 2023 EPS, 19.6 times estimated 2024 earnings of $12.75 and 17.4 times estimated 2025 earnings of $14.32 per share. The stock’s 52-week trading range is $183.25 to $262.20. Dollar General pays an annual dividend of $2.20 (yield of 0.86%). Total shareholder return for the past year is 11.6%.
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Kroger

Grocery store operator Kroger Co. (NYSE: KR) has added more than 15% to its share price over the past 12 months. Until the company announced a $24.6 billion merger with rival Albertsons, the stock was trading nearly flat with its year-ago price. Compared to its 52-week high posted in early April, the stock has dropped by around 22%.

That high was posted just as inflationary worries and inventory issues rattled virtually every retailer. Kroger also reported fairly weak first-quarter results in early May, including a margin decline of 26 basis points. The company turned that around in the second quarter, and investors (75% of which are institutions) will be watching margins closely.

Of 21 analysts covering the stock, 12 rate it at Hold. Seven have a Buy or Strong Buy rating, and two have Sell or Strong Sell ratings. At a share price of around $49.00, the upside potential based on a median price target of $51.00 is 4.1%. At the high price target of $75.00, the upside potential is 53%.
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Fiscal third-quarter revenue is forecast at $33.92 billion, down 2.1% sequentially and up 6.5% year over year. Adjusted EPS are tabbed at $0.81, down 10.1% sequentially and up by 3.8% year over year. For the full 2023 fiscal year ending in January, Kroger is expected to post EPS of $4.09, up 11%, on sales of $148.15 billion, up 7.4%.

The stock trades at 12 times expected 2023 EPS, 11.7 times estimated 2024 earnings of $4.18 and 11.4 times estimated 2025 earnings of $4.29 per share. The stock’s 52-week range is $40.18 to $62.78. Kroger pays an annual dividend of $1.04 (yield of 2.12%). Total shareholder return for the past year is 18%.