‘Holy Cow’ Exclaims Analyst On Tractor Supply’s Record Guidance; Shares Surge 9%


Shares in Tractor Supply (TSCO) surged 9% in Tuesday’s after-hours trading, after the company pre-announced surprisingly impressive Q2 trends, featuring +24-29% sales growth and +20-25% comparable store sales growth.

“Our outlook for record-breaking sales and earnings in the second quarter demonstrates the potential for Tractor Supply to emerge stronger than before as we continue to gain market share and build our business for the future,” said Hal Lawton, Tractor Supply’s CEO.

Notably, TSCO’s e-commerce business has experienced substantial growth quarter-to-date with many customers choosing Buy Online, Pickup At Store and the new contactless curbside delivery option, the company stated.

And while there is still a significant portion of the second quarter ahead, Tractor Supply is now forecasting net sales growth of 24% to 29% and comparable store sales growth of 20% to 25%.

Building on first quarter momentum, the company’s gross profit performance continues to be strong with gross margin expansion anticipated for the second quarter.

“For the second quarter, the net incremental operating expenses related to the COVID-19 pandemic are estimated to be at the high end of the Company’s previous guidance range of $30 million to $50 million” Tractor Supply said, with diluted earnings per share forecast at $2.45 to $2.65.

Following the news Wells Fargo analyst Zachary Fadem exclaimed “Holy cow… reason to believe comps could be even better.” He continued: “Considering the timing of today’s release, we believe sales likely accelerated throughout the month of May, and with all of June remaining in Q2, we believe comps could be tracking even higher today (+30%).”

In a category comprised of many sub-scale players, he sees TSCO as increasingly advantaged, and clearly benefitting from robust category demand (lawn/garden, pet, etc.), Omnichannel investments and its recently launched national ad campaign.

“While we can’t help but think about next year’s tough compare, we continue to view TSCO a core holding in today’s market, favoring its staples-like offerings, high quality execution, and ample long-term comp drivers” he concluded. As a result, Fadem ramped up his price target to $130 from $105 previously.

Similarly, Oppenheimer’s Brian Nagel boosted his price target from $110 to $135 on the news, while Baird’s price target rose to $130 from $115 previously. Overall the stock scores a Moderate Buy analyst consensus rating and $107 average analyst price target. Shares are currently trading up 19% on a year-to-date basis. (See Tractor Supply stock analysis on TipRanks).

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