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Tractor Supply (TSCO) in the Red, What's Hurting the Stock?
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Renowned farm and ranch store chain in the U.S., Tractor Supply Company (TSCO - Free Report) seems to be in a state of doldrums. The company, which has seen its stock price plunge 19.5% over the past one month and nearly 19% on a year-to-date basis, carries a Zacks Rank #5 (Strong Sell) today. What’s going wrong with this Agricultural stock? Let’s find out.
A challenging economic backdrop has been threatening the agricultural and energy sectors, which has been bearing the brunt of cautious consumer spending. Unfortunately, Tractor Supply fell prey to these headwinds as is evident from its not so impressive third quarter-to-date performance, which was announced last week.
The company recorded lower-than-expected sales in the quarter-to-date, on account of lower sales and transaction count in communities that are heavily dependent on the agricultural industry. Further, the energy-producing regions are also experiencing lower transaction count along with declining comps. Finally, the company witnessed soft demand for pre-season heating products, like heating fuel and wood stoves, which hurt its sales trends in the Northeast.
Owing to the pre-season heating trends and economic environment, along with a drab quarter-to-date performance, management trimmed its full-year 2016 guidance. The company now projects net sales in the range of $6.70–$6.75 billion for 2016, compared with $6.8–$6.9 billion estimated earlier. Comps are expected to grow 1%–1.7%, compared with a 2.5%–3.5% increase guided previously.
Further, the company anticipates net income between $432–$438 million or earnings per share in the band of $3.22–$3.26. Earlier, management had estimated net income in the range of $451–$456 million or earnings per share in the band of $3.35–$3.40.
Following the third-quarter to date review and a lowered outlook, the Zacks Consensus Estimate has been trending downwards, highlighting the negative sentiment among investors. Evidently, the earnings estimate for the third quarter and full year 2016 have dropped 8.3% and 4.1% to 66 cents and $3.24, respectively over the past 7 days.
Apart from this, Tractor Supply’s business is highly seasonal, with sales and profits usually soaring in the spring and winter selling seasons. Unseasonable weather, heavy precipitation, drought conditions and early or late frosts may have a material effect on the company’s financial condition and operational results. As a matter of fact, the company’s seasonal business nature had played foul in second-quarter 2016 where comps were hurt by weaker-than-anticipated sales of spring season categories.
We believe that these factors, along with volatility in Tractor Supply’s raw material prices, remain concerns for the company’s ongoing performance.
As a prudent investment strategy advises one to exit underperforming stocks at the right juncture, we suggest you to do the same with Tractor Supply, before it burns a hole in your portfolio.
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
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Tractor Supply (TSCO) in the Red, What's Hurting the Stock?
Renowned farm and ranch store chain in the U.S., Tractor Supply Company (TSCO - Free Report) seems to be in a state of doldrums. The company, which has seen its stock price plunge 19.5% over the past one month and nearly 19% on a year-to-date basis, carries a Zacks Rank #5 (Strong Sell) today. What’s going wrong with this Agricultural stock? Let’s find out.
TRACTOR SUPPLY Price and Consensus
TRACTOR SUPPLY Price and Consensus | TRACTOR SUPPLY Quote
What Is Troubling TSCO?
A challenging economic backdrop has been threatening the agricultural and energy sectors, which has been bearing the brunt of cautious consumer spending. Unfortunately, Tractor Supply fell prey to these headwinds as is evident from its not so impressive third quarter-to-date performance, which was announced last week.
The company recorded lower-than-expected sales in the quarter-to-date, on account of lower sales and transaction count in communities that are heavily dependent on the agricultural industry. Further, the energy-producing regions are also experiencing lower transaction count along with declining comps. Finally, the company witnessed soft demand for pre-season heating products, like heating fuel and wood stoves, which hurt its sales trends in the Northeast.
Owing to the pre-season heating trends and economic environment, along with a drab quarter-to-date performance, management trimmed its full-year 2016 guidance. The company now projects net sales in the range of $6.70–$6.75 billion for 2016, compared with $6.8–$6.9 billion estimated earlier. Comps are expected to grow 1%–1.7%, compared with a 2.5%–3.5% increase guided previously.
Further, the company anticipates net income between $432–$438 million or earnings per share in the band of $3.22–$3.26. Earlier, management had estimated net income in the range of $451–$456 million or earnings per share in the band of $3.35–$3.40.
Following the third-quarter to date review and a lowered outlook, the Zacks Consensus Estimate has been trending downwards, highlighting the negative sentiment among investors. Evidently, the earnings estimate for the third quarter and full year 2016 have dropped 8.3% and 4.1% to 66 cents and $3.24, respectively over the past 7 days.
Apart from this, Tractor Supply’s business is highly seasonal, with sales and profits usually soaring in the spring and winter selling seasons. Unseasonable weather, heavy precipitation, drought conditions and early or late frosts may have a material effect on the company’s financial condition and operational results. As a matter of fact, the company’s seasonal business nature had played foul in second-quarter 2016 where comps were hurt by weaker-than-anticipated sales of spring season categories.
We believe that these factors, along with volatility in Tractor Supply’s raw material prices, remain concerns for the company’s ongoing performance.
As a prudent investment strategy advises one to exit underperforming stocks at the right juncture, we suggest you to do the same with Tractor Supply, before it burns a hole in your portfolio.
Nonetheless, one can count on better-ranked retail stocks like Big 5 Sporting Goods Corp. (BGFV - Free Report) , Five Below, Inc. (FIVE - Free Report) and ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>