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Tractor Supply (TSCO) Beats on Earnings in Q1, Stock Up

Tractor Supply CompanyTSCO posted a robust first-quarter 2016, wherein both the top and the bottom lines surpassed estimates and increased year over year. Consequently, shares of this farm and ranch store retailer climbed 6% in the after-hours trading session yesterday.

The company's earnings of 50 cents per share rose 19% year over year and beat the Zacks Consensus Estimate of 46 cents.

Tractor Supply Company (TSCO) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Top line grew 10.2% year over year to $1,467.8 million and surpassed the Zacks Consensus Estimate of $1,451 million. Quarterly comparable-store sales (comps) of this Zacks Rank #3 (Hold) company rose 4.9% compared with a 5.7% increase recorded a year ago.

The robust first-quarter comps were mainly attributable to improvement in both traffic and ticket. Further, the company witnessed broad-based sales growth as comps improved at the company's major product categories and geographic regions. Sales gains during the quarter came on the back of strength in the consumable, usable, and edible (C.U.E.) products, particularly livestock feed and pet food. Also, the company witnessed solid sales growth for seasonal products due to the onset of the spring season in the first quarter. These products included lawn and garden, riding mowers and fencing.

Margins & Costs

The company's gross profit jumped 11.2% year over year to $494.4 million. Gross margin expanded 30 basis points (bps) to 33.7% primarily on the back of solid merchandise margins, offset to some extent by higher transportation costs.

Selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, contracted 10 bps to 26.3% gaining from strong comps growth coupled with efficient expense control and payroll management. In dollar terms, SG&A expenses, including depreciation and amortization, increased 9.8% to $386.2 million.

Operating income margin expanded 40 bps to 7.4% in first-quarter 2016. Also, operating income, in dollar terms, rose 16.6% to $108.2 million.

Financial Position

Tractor Supply ended the first quarter with cash and cash equivalents of $74.5 million, and total stockholders' equity of $1,352.7 million, as of Mar 26, 2016.

Further, the company incurred $36.7 million in capital expenditure in the first quarter and generated $62.6 million as cash flow from operating activities.

Store Update

During the first quarter, Tractor Supply opened 36 stores and closed 3 stores, compared with the addition of 41 stores and 1 closure in first-quarter 2015. Consequently, the company ended the reported quarter with 1,521 stores.

Guidance

Following a strong start to 2016 with solid first-quarter results, the company is keen on making most of the spring selling season, which is a key contributor to its financial results for the first half of 2016.

That said, management reiterated its financial projections for 2016. It expects sales in the range of $6.9-$7.0 billion in 2016, while comps are anticipated to increase about 3.5-5.0%. Further, the company envisions full-year earnings between $3.40 and $3.48 per share.

Additionally, capital expenditures for 2016 are anticipated to range from $230-$250 million. The company expects to incur part of this on about 115-120 store openings during the year.

Stocks to Consider

Some better-ranked stocks in the same industry are Sally Beauty Holdings Inc. SBH and ULTA Salon, Cosmetics & Fragrance Inc. ULTA , each with a Zacks Rank #1 (Strong Buy), and Cabela's Inc. CAB with a Zacks Rank #2 (Buy).

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TRACTOR SUPPLY (TSCO): Free Stock Analysis Report

CABELAS INC (CAB): Free Stock Analysis Report

SALLY BEAUTY CO (SBH): Free Stock Analysis Report

ULTA SALON COSM (ULTA): Free Stock Analysis Report

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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.


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

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