Tractor Supply Delivers What Investors Want; A Good Quarter With An Improving Outlook

Shares of Tractor Supply Company TSCO rose more than 4 percent after the rural lifestyle retailer delivered a solid fourth-quarter beat with strong outlook.

Quarterly Print

The quarter was highlighted by a 3.1 percent comp (vs. consensus 1.9 percent) and EPS of $0.94 (vs. consensus $0.91), driven by cold weather conditions in December.

Further, the company guided to a positive comp in the first quarter and sees full-year 2017 largely in line with buy side expectations that embed improving comps but transitory margin pressure.

“While the company projected a bit less conviction in its current longterm mid-teens EPS growth algorithm guidance and hinted that the algorithm could be tweaked to low double-digit growth at its analyst day on February 21, we believe this level of growth in 2018 and beyond is achievable,” Wedbush analyst Seth Basham wrote in a note.

Rating And Justification

Basham, who reiterated his Outperform rating on the stock, pointed out to Tractor Supply’s 2017 comp guidance of 2-3 percent, which came in above consensus' 2.2 percent at the midpoint. The company sees EPS at $3.44–$3.52, in line with consensus’ $3.52 at the high end and about in line with buy side expectations.

Basham sees room for potential comp upside in the second half given normalized weather, slight easing of comparisons, improved big ticket spending and easing deflation.

At last check, shares of Tractor Supply grew 4.12 percent to $75.35. The analyst has a price target of $85.