Tractor Ups Outlook - Analyst Blog

Tractor Supply Company (TSCO) raised its sales and earnings outlook for fiscal 2010 on the back of better-than-expected sales.

Tractor is well positioned to capitalize on positive long-term trends. The company now expects fiscal 2010 topline to range between $3.57 billion and $3.59 billion compared with the previous range of $3.53–$3.55 billion.

On the back of perked-up results and brighter sales trends,Tractor increased its fiscal 2010 earnings guidance to a range of $2.16 to $2.19 from a prior range of $2.09 to $2.13.

The Zacks Consensus Estimate for fiscal fourth-quarter 2010 earnings is 56 cents per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $2.14 and $2.42.

During the third quarter, Tractor reported earnings from operations of 43 cents a share, beating the Zacks Consensus Estimate of 37 cents. The company also outpaced earnings of 30 cents in the prior-year quarter. Strong performance in consumable, usable and edible categories − for instance, pet food and animal feed − acted as a catalyst for a 5.0% increase in same-store sales compared with a decrease of 5.1% in the prior-year quarter.

Tractor Supply had suffered setbacks during the recession as buyers avoided big-ticket purchases such as mowers, but results have improved in recent quarters. The company's impressive merchandising improvement strategy and solid same-store sales trend should result in double-digit top-line growth for the company.

The company operates in a highly fragmented industry and faces competition from larger retailers such as The Home Depot Inc. ( ">HD )  and Lowe's Companies Inc. (LOW) as well as from independently owned retail farm and ranch stores, privately held regional farm store chains and cooperatives.

We maintain our long-term Outperform recommendation on Tractor. The quantitative Zacks #3 Rank (short-term Hold rating) on the company indicates no clear directional pressure on the shares over the near term.

Tractor Supply is expected to deliver a profitable quarter in the face of a persistently torpid global economy. In spite of the present economic conditions, the underlying trends of the company remain quite promising.

 
HOME DEPOT (HD): Free Stock Analysis Report
 
LOWES COS (LOW): Free Stock Analysis Report
 
TRACTOR SUPPLY (TSCO): Free Stock Analysis Report
 
Zacks Investment Research