Tractor Supply Up 12% Post Q3 Earnings: Can It Tread Higher?

Shutterstock photo

Tractor Supply Company TSCO has been putting up a robust financial show, courtesy of its various strategic initiatives, including store-growth efforts, ONETractor plan and investment in everyday businesses. Moreover, the company has outpaced the earnings and sales estimates in four of the trailing five quarters. This momentum continued in third-quarter 2018 as well.

Shares of Tractor Supply gained 11.9%, since it released quarterly numbers on Oct 25. In third-quarter 2018, this Zacks Rank #2 (Buy) company's earnings and sales surpassed estimates and improved year over year. Results were backed by robust comparable-store sales (comps) performance driven by ongoing efforts to build customer loyalty and enhance digital capabilities. It is also working to strike a balance between initiatives, and investments in stores and distribution centers with strict cost disciplines and operational efficiencies.

Encouraged by impressive quarterly results, management raised its guidance for 2018. Net sales are now projected in the band of $7.84-$7.87 billion, up from $7.77-$7.80 billion guided earlier. Comps growth for the year is anticipated in the range of 4-4.5%, up from the previous guidance of 3-3.5%. Further, Tractor Supply envisions earnings per share of $4.23-$4.27, up from $4.10-$4.20 anticipated previously. Earnings projection also reflects a sharp rise from $3.33 earned in 2017.

Solid quarterly results and upbeat outlook for 2018 have boosted analysts' optimism in the stock, as evident from the surge in share price as well as upward estimate revisions for the company's earnings. The Zacks Consensus Estimate of $4.28 for 2018 and $4.71 for 2019 moved up 9 cents and 11 cents, respectively, over the last 30 days.

Let's Take a Brief Look at its Growth Initiatives

Tractor Supply remains focused on integrating its physical and digital operations to resonate well with the changing consumer trends in a bid to enrich shopping experience. In this regard, the company's "ONETractor" initiative aimed at connecting store and online shopping is worth mentioning. The company is reaping significant benefits from its Buy Online Pick Up in Store program, while it continues to expand its Neighbor's Club customer rewards program. Notably, it posted robust double-digit e-commerce sales growth for 25 straight quarters in the third quarter.

Further, the company is benefiting from the impressive network of Petsense and leveraging its existing pets business. This acquisition enables Tractor Supply to tap roughly $60 billion pet market, which remains poised to grow owing to the solid pet ownership trend. The Petsense buyout is fortifying Tractor Supply's presence in the flourishing pet specialty space. In 2018, management intends to open nearly 20 Petsense stores.

Tractor Supply's store-expansion endeavors and incorporation of technological advancements to induce traffic are commendable as well. Notably, the company progresses smoothly to attain its long-term domestic store-growth target of 2,500 stores, thus, remaining on track to open 80 flagship stores in 2018. All these strategies are anticipated to significantly boost the top line and profitability.

Backed by the aforementioned factors and impressive quarterly performances, shares of the company have surged 52.3% in a year, outperforming the industry 's 36.2% rally.

All said, we believe this momentum is likely to continue in the upcoming quarters. Also, a VGM Score of B with an expected long-term earnings growth rate of 12.2% highlight Tractor Supply's inherent potential.

Want More of Solid Retail Stocks? Check These

MarineMax, Inc. HZO delivered a positive earnings surprise of 87.5% in the last reported quarter and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

DICK'S Sporting Goods, Inc.'s DKS earnings have exceeded the estimates in each of the trailing four quarters, with an average of 18.2%. The company carries a Zacks Rank #2.

Five Below, Inc. FIVE is also a Zacks Ranked #2 stock, which has an impressive long-term earnings growth rate of 30%.

Wall Street's Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It's a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Five Below, Inc. (FIVE): Free Stock Analysis Report

DICK'S Sporting Goods, Inc. (DKS): Free Stock Analysis Report

MarineMax, Inc. (HZO): Free Stock Analysis Report

Tractor Supply Company (TSCO): Free Stock Analysis Report

To read this article on Zacks.com click here.

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: FIVE , DKS , HZO , TSCO

More from Zacks.com




Equity Research

Research Brokers before you trade

Want to trade FX?