Market Overview

Barclays Positive On Tractor Supply's $116 Million Petsense Acquisition


Barclays is positive on Tractor Supply Company (NASDAQ: TSCO)'s deal to buy Petsense, for about $116 million, saying the acquisition would boost Tractor Supply's pet specialty retail business.

For context, accounting for 44 percent of sales in pet food, the pet business is an important cog in the wheel for Tractor Supply. The deal complements Tractor Supply's HomeTown Pet stores and the acquisition gives it immediate scale in this segment. Longer term, the company noted it has the opportunity to introduce an exclusive brand in Petsense stores.

"The Petsense stores have a product mix that is more premium than a traditional Tractor store. Aside from product mix, it also provides services such as training and grooming that are not available in the Tractor fleet," analyst Matthew McClintock wrote in a note.

McClintock noted that the deal also provides Tractor Supply an opportunity to address younger customers residing in small town or suburban area.

Tractor Supply isn't expecting the transaction to impact earnings in FY2016 nor did it provide guidance on when it will start being accretive. But, it expects to incur one time transaction costs from the acquisition of $0.01 to $0.015 per share in the fourth quarter.

McClintock has an Overweight rating on Tractor Supply stock with a price target of $90.

At time of writing, shares of Tractor Supply fell 1.33 percent to $67.33.

Latest Ratings for TSCO

May 2019MaintainsOverweight
Apr 2019MaintainsEqual-Weight
Apr 2019MaintainsOutperformOutperform

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