Tractor Supply has agreed to snap up farm and ranch retailer, Orscheln Farm and Home, in a cash deal worth $297 million. Shares of the largest US rural lifestyle retailer rose almost 5% to close at $170.25 on Feb. 17.
The purchase price is net of acquired estimated future tax benefits of $23 million. Tractor Supply (TSCO) is looking to fund the acquisition through existing cash on hand.
The deal is expected to be immediately accretive to EPS. With the realization of planned synergies, the company anticipates the earnings accretion to grow over time.
The transaction awaits receipt of regulatory approval and completion of certain customary closing conditions. (See Tractor Supply stock analysis on TipRanks)
Tractor Supply CEO Hal Lawton said, “This is an exciting step for Tractor Supply as we expand our footprint in the Midwest with the high-quality assets of Orscheln Farm and Home.”
“We look forward to bringing together our highly complementary cultures and teams to realize the long-term value and benefits that we expect this acquisition to deliver,” Lawton added.
Raymond James analyst Bobby Griffin reiterated a Buy rating on the stock with a price target of $175, and argued that the acquisition is “strategically sound and fits well with the company’s long-term vision and market share opportunity.”
Tractor Supply’s “high-mix of C.U.E. products, rural nature of store base, and improving omnichannel capabilities” positions “the company well to weather any ongoing impacts from COVID-19 in 2021,” Griffin added.
Wall Street analysts are cautiously optimistic about the stock. The Moderate Buy consensus rating breaks down into 8 Buy ratings versus 3 Hold ratings. The average analyst price target stands at $172.10, which implies that shares are almost fully valued at current levels. That’s after the stock increased 30% over the past three months.
Tractor Supply scores a 9 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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