Tractor Supply Company ( TSCO ),
a leading retail firm and ranch store brand, is scheduled to report
its second-quarter 2012 financial results after the market closes
on July 25, 2012. The current Zacks Consensus Estimate, for the
quarter, is $1.39 per share and revenue is expected to be $1,302
First-quarter 2012, a Synopsis
Tractor Supply's first-quarter 2012 earnings came in at 55
cents, surpassing the Zacks Consensus Estimate of 54 cents as well
as the prior-year earnings of 24 cents per share.
Tractor Supply's first-quarter results benefited mainly from the
structural improvements made over the years. This enabled the
company to adjust its offerings to suit customer demand and to
promptly respond to events, such as the early onset of spring in
During the recession, Tractor Supply had suffered setbacks as
buyers avoided big-ticket purchases, such as mowers, but recent
quarters have seen an uptick in results. The company's impressive
merchandising improvement strategy along with solid same-store
sales trend resulted in double-digit top-line growth in revenues.
Net sales in the quarter surged 22% to $1,020.4 million from $836.6
million in the prior-year quarter. Moreover, total revenue
surpassed the Zacks Consensus Estimate of $1,002 million.
Guidance for 2012
Encouraged by strong first-quarter results, the company raised
its 2012 earnings guidance range to $3.52 to $3.60 per share
compared with its earlier forecast of $3.38 to $3.46 per share.
Moreover, net sales forecast for 2012 has also been raised to
$4.61 - $4.68 billion versus the previous guidance of $4.56 - $4.66
billion. In 2012, same store sales are expected to register an
increase of 4.0% to 5.5%, up from its prior forecast of 3% to 5%.
Further, the company has planned to open 90 to 95 new stores during
The analyst covered by Zacks expects Tractor Supply to post
second-quarter 2012 earnings of $1.39 a share, higher than $1.23
delivered in the prior-year quarter. Currently, the Zacks Consensus
Estimate ranges between earnings of $1.33 and $1.46 a share.
For 2012, the Zacks Consensus Estimate stood at $3.68 per share,
higher than its previous fiscal earnings of $3.01 per share. The
current Zacks estimate ranges between $3.58 and $3.75 per
Estimate Revisions Trend
We do not see any major estimate revisions at this point. Among
the 19 estimates, one estimate for the second quarter revised
upward while one moved in the opposite direction in the last 30
days. In the last 7 days, one estimates moved downward while none
moved in the opposite direction.
For full-year 2012, 1 out of 21 estimates was revised downward
while none moved in the opposite direction in the last 7 and 30
The Zacks Consensus Estimate for the upcoming quarter inched
down by a penny over the last 30 days. Some of the analysts believe
that the company's second-quarter financial performance may
disappoint due to drought and moderate consumer spending.
However, for 2012, most of the analysts remained constructive on
the stock based on the company's growth prospects and kept their
estimates intact, in the absence of any major news having a direct
or an indirect impact on the estimates.
With respect to earnings surprises, Tractor Supply has topped
the Zacks Consensus Estimate over the last four quarters in the
range of 1.9% to 11.5%. The average surprise over the last four
quarter remained at positive 5.1%.
Tractor Supply is the largest operator of farm and ranch stores
in the U.S., a unique market niche that serves the lifestyle needs
of recreational farmers and ranchers. The company's stores are
strategically located in small towns, close to its target
customers, providing it with a competitive edge over its
We believe that Tractor Supply has successfully tweaked
merchandise assortment across its stores, which is in line with the
prolonged economic downturn. The company has increased the
proportion of less discretionary items, such as animal and
pet-related products, while reducing shelf space for certain
big-ticket merchandise, such as outdoor power equipment.
Moreover, in an effort to boost margins, Tractor Supply is
expanding its portfolio of private label brands and is also
focusing on direct sourcing. The company has set a long-term target
of generating 25% of sales from private label brands and 13% from
strategic direct sourcing. This provides a strong upside potential
to the company.
However, the company operates in a highly fragmented industry
and faces intense competition from larger retailers, such as
The Home Depot Inc. ( HD ) and
Lowe's Companies Inc. ( LOW ) as
well as from independently-owned retail farm and ranch stores,
privately-held regional farm store chains as well as cooperatives.
Being in such a high competitive industry, Tractor Supply may find
it difficult to execute and implement new business strategies,
which in turn, may impact its operations adversely.
Currently, we are maintaining a long-term 'Outperform'
recommendation on Tractor Supply. However, the company has Zacks #3
Rank implying a short-term Hold rating on the stock.
HOME DEPOT (HD): Free Stock Analysis Report
LOWES COS (LOW): Free Stock Analysis Report
TRACTOR SUPPLY (TSCO): Free Stock Analysis
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