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Tractor Supply (TSCO) Beats on Q2 Earnings, Raises '18 View


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Tractor Supply Company TSCO reported impressive results in second-quarter 2018, wherein both the top and bottom line outpaced estimates and grew year over year. As a result, management raised its guidance for 2018.

Following the solid quarterly results, shares of this leading rural lifestyle retail store chain were up 3.3% in pre-market trading . In a year's time, this Zacks Rank #2 (Buy) stock has surged 38.3%, outperforming the industry 's 5.6% rise.



Q2 Highlights

Tractor Supply reported quarterly earnings of $1.69 per share, beating the Zacks Consensus Estimate of $1.61. The bottom line also increased 35.2% year over year, courtesy of the company's growth initiatives.

The company's revenues increased 9.7% to $2,213.2 million and exceeded the Zacks Consensus Estimate of $2,173 million. This year-over-year improvement was driven by a 5.6% rise in comparable-store sales (comps) compared with 2.2% in the year-ago period. While store transaction count grew 1.8%, comparable average ticket edged up 3.7%. Traffic and sales growth was boosted by the company's ongoing efforts to build customer loyalty and enhance digital capabilities. Additionally, comps gained from improvement across all geographic regions as well as solid growth in spring and summer seasonal categories, and all merchandise groups.

Tractor Supply Company Price, Consensus and EPS Surprise

Tractor Supply Company Price, Consensus and EPS Surprise | Tractor Supply Company Quote

Margins & Costs

Gross profit rose 9.2% year over year to $769.4 million in the second quarter, while gross margin contracted 16 basis points (bps) to 34.8%. The decline in margin can be attributed to increased freight costs due to rise in carrier rates and diesel fuel prices, somewhat offset by gains from price management program as well as lower promotional activity.

Further, selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, grew 27 bps to 22.4%. This increase was mainly driven by higher incentive compensation, and investments in infrastructure and technology, partly offset by lower occupancy and other costs.

Financial Position

Tractor Supply ended the quarter with cash and cash equivalents of $70 million, long-term debt of $516.4 million and total stockholders' equity of $1,406 million.

In the first six months of 2018, the company repurchased shares for $252.5 million and paid dividends of $71.4 million. Additionally, it incurred capital expenditures of $116.7 million and generated cash flow from operating activities of about $274 million at the end of the reported quarter.

Store Update

In the second quarter, Tractor Supply opened 25 namesake stores and three Petsense stores. This apart, it shuttered one Petsense store. Year to date, the company launched 40 namesake and seven Petsense stores besides closing one Petsense store.

As of Jun 30, 2018, the company operated 1,725 Tractor Supply stores in 49 states and 174 Petsense stores.

Guidance

Management remains impressed with its quarterly results, wherein the company witnessed increased profits, comps growth and higher sales. Also, Tractor Supply expects to balance investments between new store growth and ONETractor strategic initiative alongside investing in everyday businesses for providing a seamless experience to its customers.

Following solid quarterly results, management raised its outlook for 2018. For 2018, Tractor Supply projects net sales in the band of $7.77-$7.80 billion compared with $7.69-$7.77 billion guided earlier. Comps growth is also anticipated in a range of 3-3.5%, up from the previous guidance of 2-3%. Further, Tractor Supply envisions earnings per share in a band of $4.10-$4.20, up from $3.95-$4.15 projected previously. The Zacks Consensus Estimate for 2018 earnings is pegged at $4.10.

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DICK'S Sporting Goods, Inc. DKS pulled off an average positive earnings surprise of 13.4% in the trailing four quarters. The company carries a Zacks Rank of 2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: TSCO , DKS , ULTA , FIVE



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