Should Investors Buy the Post-Earnings Dip in Dollar Tree Stock?

Core Viewpoint - Dollar Tree reported strong Q2 results but experienced an 8% stock dip due to underwhelming Q3 guidance and profit-taking, despite being viewed as a defensive stock amid macroeconomic challenges [1][2]. Group 1: Q2 Performance - Dollar Tree achieved Q2 earnings of $0.77 per share, exceeding EPS expectations of $0.38 by 102% [3]. - The company reported Q2 sales of $4.56 billion, surpassing estimates of $4.45 billion [3]. - During the quarter, Dollar Tree opened 106 new stores and converted 585 stores to a new multi-price format, enhancing customer engagement [4]. Group 2: Guidance and Outlook - Dollar Tree raised its full-year revenue guidance to $19.3-$19.5 billion, up from $18.5-$19.1 billion [8]. - The company expects full-year adjusted EPS to be between $5.32-$5.72, an increase from the previous range of $5.15-$5.65 [8]. - However, the Q3 EPS outlook is flat year-over-year at $1.12, missing Wall Street's expectation of $1.33 due to higher discounts and input costs [9]. Group 3: Valuation Metrics - Following the recent stock dip to around $102, Dollar Tree trades at a forward earnings multiple of 20.3X, which is below the S&P 500 benchmark and the Zacks Retail-Discount Stores Industry average of 22.3X, but above Dollar General's 18.7X [10].