Tractor Supply Company
) - a leading retail firm and ranch store brand - is scheduled to
report its third-quarter 2012 financial results after the market
closes on October 24, 2012. The current Zacks Consensus Estimate,
for the quarter, is 67 cents per share reflects a year-over-year
growth of 15.00%. The estimates in the current Zacks Consensus
range between a low of 63 cents and a high of 69 cents a share.
Revenue, as per the Zacks Consensus Estimate, is $1,069 million
for the quarter.
With respect to earnings surprises, Tractor Supply has topped
the Zacks Consensus Estimate over the last four quarters in the
range of 1.85%-11.54%. The average surprise over the last four
quarters remained at 5.52%.
Second-quarter 2012, a Synopsis
Tractor Supply's posted earnings of $1.45 per share for the
second-quarter 2012 growing over 15% from the year-ago period
earnings of 58 cents, primarily driven by strong top-line
performance and improved margins. Moreover, earnings were ahead
of the Zacks Consensus Estimate of $1.39 per share.
Tractor Supply's second-quarter results benefited mainly from
the structural improvements made over the years. This enabled the
company to adjust its offerings according to customers' demand
and to promptly respond to events, such as the early onset of
spring in March 2012.
During the recession, Tractor Supply had suffered setbacks as
buyers avoided big-ticket purchases, such as mowers; however, the
recent quarters witnessed an uptick in results. The company's
impressive merchandising improvement strategy along with solid
same-store sales trend resulted in high single-digit top-line
growth in revenues. Net sales in the quarter improved 9.6% to
$1,291.9 million from $1,178.4 million in the prior-year quarter.
However, total revenue missed the Zacks Consensus Estimate of
Encouraged by strong second-quarter results, the company
raised its 2012 earnings guidance range to $3.58-$3.66 per share
compared with its earlier forecast of $3.52-$3.60 per share.
(For full report on earnings study:
Tractor Supply Beats on Bottom Line
Estimate Revisions Trend
We do not see any major estimate revisions at this point.
Among the 20 estimates, one was revised upward for the third
quarter and fiscal 2012, while no movement was seen in the
opposite direction in the last 30 days.
However, over the last 7 days, none of the analysts revised
their estimates in either direction for the third quarter as well
as fiscal 2012.
Due to a few positive estimate revisions in the last 30 days,
the Zacks Consensus Estimate for the upcoming quarter and fiscal
2012 inched up by a penny. However, no movement in estimates has
been noticed in the last 7 days for third-quarter as well as for
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 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 Tractor Supply with a
strong upside potential.
However, sluggish economic recovery along with risk of
unfavorable weather conditions affecting farmers' business
operations are matter of concern. Moreover, due to intense
competition from larger retailers such as
The Home Depot Inc.
Lowe's Companies Inc.
), Tractor Supply may find it difficult to execute and implement
new business strategies, which in turn, may impact its operations
Further, Tractor Supply currently has a price-to-book ratio of
6.48 and price-to-sales ratio of 1.50, which is substantially
above the peer group average of 3.16 and 1.16, respectively. In
addition, the stock is trading at a premium to its peer group
based on forward earnings estimates. We believe the shares are
richly valued, and therefore we remain somewhat apprehensive on
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TRACTOR SUPPLY (TSCO): Free Stock Analysis
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