Tractor Supply Earnings Preview

Tractor Supply TSCO is scheduled to share its second-quarter 2011 results tomorrow, July 20, after the markets close. Investors will be watching to see if the specialty retailer will beat consensus earnings estimates for the seventh consecutive quarter. Analysts are looking for Tractor Supply to report per-share earnings of $1.19, which is up from $1.03 per share earnings in the same period of last year. The estimate is unchanged in the past 60 days. The consensus forecast also calls for revenues of $1.2 billion, an increase of 11.6% from a year ago. As noted above, analysts have underestimated Tractor Supply earnings in recent quarters; the beat was by seven cents per share in the first quarter. And analysts so far are looking for year-over-year growth of 15.7% for earnings and 12.6% for revenue in the current quarter. The Company Brentwood, Tennessee-based Tractor Supply operates about 1,000 retail farm and ranch stores in the United States. Its offerings include animal feeds, fencing, power tools, gardening tools, work clothing and seasonal products. The company also operates the TractorSupply.com website. During the three months that ended in June, the company reported record first-quarter results, lifted its full-year EPS forecast, increased its dividend and extended its share buyback program. Deutsche Bank reiterated its Buy rating on the stock after meeting with Tractor Supply management. Performance The company has a dividend rate of 0.5% and a return on equity of 16.9%. The long-term earnings per share growth forecast is 16.6%. Despite hefty P/E and PEG ratios, the consensus recommendation of analysts is to buy TSCO and has been for more than 90 days. The share price has pulled back from a recent multiyear high of $73.09 to close yesterday at $68.46. Shares are 45.8% higher than six months ago and up 101.2% in the past year. The stock has outperformed its industry average, big-box competitors Home Depot HD and Lowe's LOW and the broader markets year to date. Action Items: Bullish: Traders interested in exchange traded funds invested in Tractor Supply might want to consider the following trades:

• iShares S&P MidCap 400 Growth Index Fund IJK: +38.2% in the past year
• Vanguard Small-Cap Index Fund VB: +33.8% in the past year
• iShares S&P MidCap 400 Index Fund IJH: +31.7% in the past year
• MidCap SPDR Trust, Series 1 MDY: +24.0% in the past year

Bearish: Traders more interested in exchange traded funds invested in Home Depot and Lowe's might want to consider these alternative positions:

• Consumer Discretionary Select Sector SPDR Fund XLY: +31.6% in the past year
• SPDR S&P 500 Trust SPY: +21.7% in the past year
• iShares S&P 500 Index Fund IVV: +21.6% in the past year

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