2 Top Stocks to Buy After Crushing Earnings Expectations: Dillard's (DDS) and Lenovo (LNVGY)

Dillard’s Q2: Resilient Demand Meets Better Margins

Dillard’s delivered fiscal second-quarter earnings of $6.25 per share, crushing consensus EPS estimates of $4.04 by nearly 55% and rising 34% year over year. Net income climbed to $97.7 million from $72.8 million.

Although net sales slipped 0.4% YoY to $1.5 billion and missed consensus by 0.76%, retail sales excluding its construction operation advanced 1%, as did comparable-store sales. Comps also edged past analysts’ 0.9% forecast.

Despite the sales miss, It’s noteworthy that Dillard’s has now exceeded earnings expectations for eight consecutive quarters, with a very impressive average EPS surprise of 35.82% in its last four quarterly reports

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The earnings quality for Q2 does require some context. A $37.2 million tariff refund contributed $1.82 per share and lifted retail gross margin by 260 basis points. Even after subtracting that benefit, Dillard's Q2 EPS was approximately $4.43—still well above the $4.04 consensus.

Reported retail gross margin expanded to 40.9% from 38.1%, while sales were particularly healthy in ladies’ accessories and lingerie, home and furniture. Dillard’s does not anticipate additional significant tariff refunds, making underlying merchandising margins more important in coming quarters.

Management didn't issue formal sales or EPS guidance, but maintained its fiscal 2026 assumptions for depreciation and amortization of $175 million, rentals of $18 million, net interest and debt income of $9 million, and capital expenditures (CapEx) of $120 million. That CapEx target is up from $93 million last year, signaling continued reinvestment despite an uneven consumer backdrop.

Dillard’s balance sheet remains the chief attraction, ending Q2 with roughly $1.26 billion in cash and short-term investments after repaying $96 million of debt. Its current ratio stands at 3.03, indicating Dillard’s has more than twice the amount of assets to liabilities.

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Plus, Dillard’s return on equity (ROE) is nearly 32%, and shares trade at a very reasonable 16X forward earnings multiple, with FY26 EPS now expected to rise 6% to $35.26. Investors should nevertheless monitor the 5% inventory increase and a 70-basis-point rise in operating expenses as a percentage of sales during Q2.

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Lenovo’s Q1 Results Highlight AI Infrastructure as a Key Profit Engine

Lenovo’s results for its fiscal first quarter were even more emphatic. The PC giant posted Q1 earnings of $1.78 per share, crushing the 65-cent EPS consensus by nearly 174%, and soaring from $0.73 a year ago.

This came as revenue surged 43% YoY to a record $26.94 billion, topping expectations of $23.27 billion by almost 16%. Adjusted net income soared 176% to $1.07 billion. A $1.69 billion noncash loss from warrant revaluation resulted in a reported net loss of $609 million, so the adjusted figures provide a clearer view of operating performance.

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Furthermore, AI-related revenue jumped 60% to $9.3 billion, representing 35% of total sales, while gross margin expanded 180 basis points to 16.5%.

Lenovo’s Intelligent Devices Group generated $17.1 billion in revenue, up 27% YoY, and preserved a 7.1% operating margin. More importantly, Infrastructure Solutions revenue nearly doubled to $8.5 billion, producing a record operating profit of $777 million and a 9.1% margin. Most astonishing, Lenovo’s AI-server pipeline reached $54 billion, up 157% sequentially. Solutions and Services added another $2.9 billion in sales, with a record 24.2% operating margin and triple-digit gains in AI-services revenue.

The company’s outlook provides a potent catalyst. Lenovo now expects to reach $100 billion in annual revenue during its current FY27, pulling that milestone forward from its prior two-year timetable.

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Management cited infrastructure demand, device pricing discipline, and expanding services as key supports. The $54 billion server pipeline is not equivalent to firm backlog, but its scale still points to a substantial opportunity in AI computing.

Lenovo stock is no longer a deep-value name after its sharp year-to-date rally (+250 %), but LNVGY still trades at a reasonable 22X forward P/E multiple, and analysts now expect 26% EPS growth in FY27 followed by an 83% earnings surge in FY28, to $6.89 per share.

An improving business mix is particularly encouraging as high-margin services and profitable infrastructure are reducing Lenovo’s dependence on the more cyclical PC market.

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Bottom Line

Lenovo offers the faster EPS trajectory,  AI exposure, and clearer revenue guidance, while Dillard’s provides a more defensive, cash-rich setup at a lower earnings multiple. 

At the time of this writing, Lenovo stock currently sports a Zacks Rank #1 (Strong Buy), with Dillard’s landing a Zacks Rank #2 (Buy).

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