Can the Rebound in Dollar Tree (DLTR) Stock Continue as Q3 Earnings Approach?

Rebounding 20% from its 52-week low of $60 a share seen in early November, investors may be wondering if the recent rally in Dollar Tree DLTR stock can continue.

To that point, Dollar Tree stock still trades 50% below a one-year high of over $150 last March but has seen nice momentum ahead of its Q3 report on Wednesday, December 4.

That said, Target’s TGT recent plunge after reporting lackluster Q3 results may have investors on edge and will have Dollar Tree under Wall Street’s scope.  

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Dollar Tree's Q3 Expectations (Overview)

Based on Zacks estimates, Dollar Tree’s Q3 sales are expected at $7.45 billion, a 2% increase from a year ago. On the bottom line, Q3 earnings are expected to increase 10% to $1.07 per share versus EPS of $0.97 in the comparative quarter.

However, Dollar Tree most recently missed Q2 earnings expectations by -37% in September with EPS of $0.67 compared to the Zacks Consensus of $1.03. This was also down from $0.91 a share in the prior-year quarter as the discount retailer hasn’t been immune to macroeconomic concerns while general liability claims have also affected Dollar Tree’s net income.

Slower growth among Dollar Tree’s subsidiary Family Dollar has been a concern as well with the company missing Q2 sales estimates of $7.5 billion by -2%. Like Target, shrink (retail theft) among other inventory issues had previously weighed on profits as Dollar Tree has missed earnings expectations in three of its last four quarterly reports with an average EPS surprise of -10.85%.

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Tracking Dollar Tree’s Potential Rebound

Overall, Dollar Tree’s total sales are now projected to be virtually flat in its current fiscal 2025 with projections at $30.71 billion. Optimistaclly, FY26 sales are expected to increase 4% to $31.97 billion.

Annual earnings are forecasted to dip -9% in FY25 but are projected to rebound and rise 13% in FY26 to $6.04 per share.

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DLTR Valuation Comparison

Making Dollar Tree’s potential rebound more intriguing is that DLTR trades at 13.6X forward earnings compared to the benchmark S&P 500’s 25.5X. Furthermore, Dollar Tree stock trades beneath Target’s 15.1X forward earnings multiple and at a very sharp discount to their Zacks Retail-Discount Stores Industry average of 21.2X.  

Notably, Dollar Tree shares trade at just 0.5X sales which is roughly on par with Target and the industry average.

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Bottom Line

Ahead of its Q3 report, Dollar Tree stock lands a Zacks Rank #3 (Hold). It’s very tempting to buy Dollar Tree shares near historical lows in regard to its P/E valuation. Still, the continued rally in DLTR will likely depend on Dollar Tree being able to reach or exceed Q3 expectations and hopefully offering positive guidance. 

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