Tractor Supply Company
), a leading retail firm and ranch store brand, is scheduled to
report its first-quarter 2012 financial results after the market
closes on April 25, 2012. The current Zacks Consensus Estimate for
the quarter is 54 cents per share. For the quarter under review,
revenue is expected to be $1,002 million, according to the Zacks
Fourth-Quarter 2011, a Synopsis
Tractor Supply's fourth-quarter 2011 earnings came in at 96
cents, breezing past the Zacks Consensus Estimate of 92 cents as
well as the prior-year earnings of 67 cents per share.
Tractor Supply has been witnessing increasing trends in
same-store sales. The reported quarter was no exception as robust
performance in core consumable, usable and edible products − for
instance, pet food and animal feed − acted as a catalyst for an
increase of 7.6% in same-store sales.
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 and solid same-store sales trend
resulted in double-digit top-line growth for the company. Net sales
in the quarter surged 20.1% to $1,240.0 million from $1,032.6
million in the prior-year quarter. The percentage growth includes a
6.6% benefit from an extra week during the quarter. Moreover, total
revenue surpassed the Zacks Consensus Estimate of $1,220.0
Guidance for Fiscal 2012
Tractor is well positioned to capitalize on positive long-term
trends. Recently, Tractor Supply provided a sneak preview of its
first-quarter 2012 results while citing a robust sales performance
during the quarter, which raised its fiscal 2012 profit forecast.
Tractor Supply raised its earnings expectation for fiscal 2012
between $3.52 and $3.60 per share from $3.38 to $3.46 per share.
Moreover, the company anticipates earnings in the range of 53 cents
to 55 cents per share, during first-quarter 2012.
The company's net sales during the first quarter surged 22% to
$1.02 billion from $836.6 million in the prior-year quarter. An
early spring in 2012 boosted same store sales, which rose 11.5% in
the first quarter. Further, the company indicated that each quarter
of 2012 will have a delayed start by one week, compared to fiscal
2011, due to the inclusion of 53
week in fiscal 2011. Mitigating the effect of the week shift, first
quarter 2012 same store sales registered an increase of 7.6%.
The analyst covered by Zacks expects Tractor Supply to post
first-quarter 2012 earnings of 54 cents a share, higher than 24
cents delivered in the prior-year quarter. Currently, the Zacks
Consensus Estimate ranges between earnings of 54 cents and 55 cents
For fiscal 2012, the Zacks Consensus Estimate stood at $3.64 per
share, higher than its previous fiscal earnings of $3.01. The
current Zacks estimate ranges between $3.51 and $3.77 per
Agreement of Estimates
For the first quarter of fiscal 2012, of the 16 analysts
covering the stock, all revised their estimates in the upward
direction in the last 30 days. For full fiscal 2012, 16 out of 19
analysts revised their estimates in positive direction, while none
revised in the opposite direction, in the last 30 days.
In the last 7 days, no movement in estimates has been noticed in
either direction either for first-quarter 2012 or fiscal 2012.
Magnitude of Estimate Revisions
With heavy positive affect from earnings revisions by analysts
in the last 30 days, the Zacks Consensus Estimates for
first-quarter 2012 has been increased by 23 cents to 54 cents per
share while for fiscal 2012 it increased by 14 cents to $3.64 per
We believe that such a heavy upward movement in estimates
resulted from the company's better-than-expected preliminary sales
result and increased earnings guidance range.
With respect to earnings surprises, Tractor Supply has topped
the Zacks Consensus Estimate over the last four quarters in the
range of 2.5% to 50.0%. The average remained at positive 17.1%.
This suggests that Tractor Supply has surpassed the Zacks Consensus
Estimate by an average of 17.1% in the trailing four quarters.
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.
Lowe's Companies Inc.
) 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.Our long-term recommendation on
the stock is supported by a Zacks #1 Rank, which translates into a
short-term 'Strong Buy' rating.
HOME DEPOT (
): Free Stock Analysis Report
LOWES COS (
): Free Stock Analysis Report
TRACTOR SUPPLY (
): Free Stock Analysis Report
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