Piper Jaffray Increases Price Target on Tractor Supply Co. (TSCO)

Piper Jaffray is out with an analyst note this morning, where it reiterates its Neutral rating on Tractor Supply Co. TSCO; it also raised its price target on the stock from $65.00 to $73.00. The Piper Jaffray analysts said, “Positive Pre-Announcement. Yesterday following the market close, TSCO positively pre-announced Q2 EPS stating a range of $2.03-$2.05 ($0.41-0.43 above our estimate of $1.62 and Consensus of $1.71). The upside to our estimate was driven largely by a stronger than expected comp of 6.1% vs. our estimate of 3% and resulted in total sales of $1.07B vs. our $1.04B estimate. Based on today's pre-announcement, we are increasing our Q2 EPS estimate to $2.04 and F10 to $4.06, slightly above the mid-point of the upwardly revised F10 guidance range of $4.00-$4.10. For Q2, we are now expecting the GM rate to increase 120bps y/y to 33.1% principally due to a strong sell-through due to favorable moisture conditions and better markdown management. We are estimating SG&A leverage of 60bps due to a better comp and sales than our original estimate.” They added, “Given TSCO is trading ~5% higher in the after-market, we are waiting for a better entry point on the stock. However, we do believe our F10 EPS estimate could prove conservative if comp trends and GM rate expansion continue in Q3 and Q4.” The PJ analysts closed by saying, “We are raising our 12-month PT from $65 to $73 which is based on 16x our F11 EPS estimate of $4.58. We are decreasing our multiple assumption from 18x to 16x and rolling to a F11 multiple which we believe is justified given a lower estimated EPS growth rate in F11.”