Tractor Supply Remains A Strong Buy Despite Near-Term Concerns: Analyst's Take

Raymond James analyst Bobby Griffin lowered the price target of Tractor Supply Co TSCO to $235 from $255 and maintained a Strong Buy rating.

The analyst lowered the near-term estimates due to expected slowing demand across various retail categories and ongoing big-ticket pressure.

The analyst sees weak transactions on continued slowing traffic momentum, which may reflect the pulling back of the company's core customer.

Consequently, Griffin lowered Q3 FY23 and FY23 EPS estimates to $2.22 (from $2.38) and 10.00 (from 10.35), respectively, ahead of its Q3 earnings.

These estimates reflect reduced comp sales forecasts to 0.0% (from +2.5%, vs. consensus of +2.1%) for Q3 FY23 and to -1.0% (from +1.3%, vs. street view of +0.7%) for Q4 FY23. 

Also, the analyst reduced FY24 comp estimates to +0.7% (from +3.5%) on a slowdown in demand trends in H2 FY23 and continued modest comp pressure in H1 FY24 (-0.5%).

Nevertheless, the analyst believes in the long-term growth prospects of TSCO's business model, margins, and potential sales and earnings growth in the coming few years.

Also Read: Tractor Supply's Q3 May Face Headwinds Amid Decline In Major Discretionary Sales, Analyst Forecasts

The company will report its FY23 results on October 26, 2023.

Price Action: TSCO shares are trading higher by 0.74% at $205.41 on the last check Tuesday.