01:10 PM EDT, 05/14/2024 (MT Newswires) -- Dollar General ( DG ) shares could rally if the discount store chain demonstrates how it plans to sustain the progress it made in the back half of 2023 during the remainder of 2024, UBS said in an earnings preview Tuesday.

Dollar General ( DG ) would have to show continued progress in "stabilizing top line trends, sharpening operations, and managing its profit & loss" during Q1 for a stock rally, the firm said.

UBS expects Dollar General ( DG ) to have sustained "positive sales trends" in Q1, but acknowledged that profitability could be overshadowed by several headwinds it likely experienced during the period.

"[Dollar General ( DG )] should have continued to face headwinds related to shrink, mix, incentive compensation, higher labor hours, and higher promotional markdowns," UBS said. But, the company is expected to overcome those obstacles in the remaining course of the year.

The firm lowered its Q1 earnings per share projection to $1.50 from $1.55 given the headwinds, compared to the consensus of $1.58. It is also at the lower end of Dollar General's ( DG ) earnings guidance of $1.50 to $1.60 per share.

Meanwhile, the firm is estimating a 5.6% year-over-year growth in the company's Q1 sales to $9.9 billion.

UBS maintained its $167 per share price target on the stock with a buy rating.

Price: 139.30, Change: +1.37, Percent Change: +0.99