Dollar General's (DG) Q2 print indicates steady recovery as initiatives to drive comparable sales are resulting in consistent earnings and revenue results, UBS Securities said in a note emailed Friday.

The company is in the early innings of its recovery phase and should have more scope to maintain its earnings momentum in H2 this year and in 2026. "We continue to see an upward earnings revision cycle driving the stock higher," UBS analysts wrote.

Dollar General could resume its share repurchases in slightly more than a year, which is expected to support earnings growth. The company's tariff-linked price hikes were "immaterial" in Q2 but could accelerate in H2, and it is well-positioned to withstand the impact of tariffs, according to the note.

The company's ecommerce playbook, including expanded partnership with DoorDash (DASH) and the introduction of Uber (UBER) Eats, should serve as tailwinds to its comps in the next quarters and years. The company generating comps of more than 2.5% in each category in Q2 reflects a better value proposition, cleaner inventory, and better in-stocks, UBS stated.

The brokerage said it reiterated its buy rating on the stock and raised its price target to $135 per share from $128.

Price: 107.82, Change: -3.89, Percent Change: -3.48