UPDATE: BMO Capital Markets Raises PT on Tractor Supply Company Following 2Q13 EPS Report

In a report published Friday, BMO Capital Markets analyst Wayne Hood reiterated a Market Perform rating on Tractor Supply Company TSCO, and raised the price target from $113.00 to $127.00. In the report, BMO Capital Markets noted, “Tractor Supply reported better-than-expected 2Q13 EPS of $1.75 compared with BMO $1.72 estimate and consensus of $1.71. Comp-store sales growth of 7.2% was in line with our 7% estimate, but above the ~5.5% consensus estimate. The earnings beat versus our estimate was driven by better-than-expected SG&A leverage (-56bp to 19.5% vs. -20bp est) as gross margins were in line with our estimate (-18bp to 34.77%). Management increased its FY2013 EPS guidance to $4.36-$4.44 from $4.32-$4.40 versus the $4.45 consensus estimate...Despite the strong quarter, we expect the two-year comp-store sales growth rate to decelerate in the back half of the year to high-single digits from low-double digits. Further, back-half EPS growth is now more reliant on gross margin expansion (est. +30bp vs. -20bp in first half) that will be difficult to achieve given the mix shift toward lower-margin CUE products, and the second-quarter performance does not give us any more or less confidence in the company's ability to do that.” Tractor Supply Company closed on Thursday at $118.33.