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Tractor Supply's (TSCO) Stock Gains Despite a Bleak Outlook
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Farm and ranch store retailer, Tractor Supply Company’s (TSCO - Free Report) shares have picked pace lately owing to the year-over-year growth in second-quarter 2017 earnings and sales, as well as positive commentary on initial third-quarter performance due to continued solid demand for spring season products. We also commend Tractor Supply’s store base expansion and omni-channel efforts, which are likely to boost the top line.
However, the company is not out of the woods yet. This was evident from the lower-than-expected top and bottom-line for the second quarter and dismal first-half 2017. Moreover, the company’s bleak outlook for 2017, despite a positive third-quarter trend, reflects there are more troubles ahead.
Mixed Stock Performance
Tractor Supply has gained nearly 15.3% in the past month, outperforming the industry’s 5.6% growth. Meanwhile, the company has underperformed the industry year to date, due to an unsatisfactory first-half 2017 performance. The stock has declined 16.7%, wider than the industry’s 13.4% fall.
Clearly, deriving any conclusion from the stock movement could be misleading. Hence, let’s quickly get into more details to find out what’s behind the company’s Zacks Rank #4 (Sell).
Unsatisfactory Q2 and First Half Performance
Tractor Supply Company Price, Consensus and EPS Surprise
Notably, Tractor Supply lagged both top and bottom lines in second-quarter 2017, following in-line earnings in the first quarter. Further, margins remained under pressure mainly due to higher freight expenses and increased SG&A costs. These factors along with an unimpressive first-half performance led management to lower forecast for 2017.
Management now projects net sales in a band of $7.13-$7.19 billion and comps growth in a range of 1.1-1.7%. The updated comps view includes a negative impact of about 30% from deflation. Gross margin is anticipated to be flat to down in 2017, owing to the dismal numbers in the first half. Moreover, Tractor Supply envisions earnings per share in a band of $3.22-$3.27.
Other Headwinds
The challenging economic backdrop at the agricultural and energy sectors has been taking a toll on consumer spending, which is hurting Tractor Supply’s performance. Moreover, the company’s highly seasonal business calls for solid top and bottom-line results in the spring and winter selling seasons on the back of seasonal demand for merchandise offering.
Consequently, an unseasonable weather significantly dents the company’s performance and hurt margins. Moreover, volatility in raw material prices, higher promotional activity and stiff competition add to the woes.
Conclusion
While Tractor Supply’s growth prospects and optimism for the spring season are noteworthy, we cannot ignore the current trends in the agricultural sector and its dependence on seasons. So, let’s see if Tractor Supply’s initiatives can help it tide over the current trends.
Still Interested in Retail? See These Trending Picks
Five Below has a long-term EPS growth rate of 28.5%. Further, the stock has returned 24.1% year to date.
Build-A-Bear has delivered an average positive earnings surprise of 73.7% in the trailing four quarters. Moreover, it has a long-term earnings growth rate of 18%.
Sally Beauty has improved 5.3% in the last three months. Further, the company has a long-term EPS growth rate of 5.6%.
New Report: An Investor’s Guide to Cybersecurity
Cyberattacks have become more frequent and destructive than ever. In fact, they’re expected to cause $6 trillion per year in damage by 2020.
The cybersecurity industry is expanding quickly in response to these threats. In fact, a projected $170 billion per year will be spent to protect consumer and corporate assets. Zacks has just released Cybersecurity: An Investor’s Guide to Locking Down Profits which reveals 4 promising investment candidates.
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Tractor Supply's (TSCO) Stock Gains Despite a Bleak Outlook
Farm and ranch store retailer, Tractor Supply Company’s (TSCO - Free Report) shares have picked pace lately owing to the year-over-year growth in second-quarter 2017 earnings and sales, as well as positive commentary on initial third-quarter performance due to continued solid demand for spring season products. We also commend Tractor Supply’s store base expansion and omni-channel efforts, which are likely to boost the top line.
However, the company is not out of the woods yet. This was evident from the lower-than-expected top and bottom-line for the second quarter and dismal first-half 2017. Moreover, the company’s bleak outlook for 2017, despite a positive third-quarter trend, reflects there are more troubles ahead.
Mixed Stock Performance
Tractor Supply has gained nearly 15.3% in the past month, outperforming the industry’s 5.6% growth. Meanwhile, the company has underperformed the industry year to date, due to an unsatisfactory first-half 2017 performance. The stock has declined 16.7%, wider than the industry’s 13.4% fall.
Clearly, deriving any conclusion from the stock movement could be misleading. Hence, let’s quickly get into more details to find out what’s behind the company’s Zacks Rank #4 (Sell).
Unsatisfactory Q2 and First Half Performance
Tractor Supply Company Price, Consensus and EPS Surprise
Tractor Supply Company Price, Consensus and EPS Surprise | Tractor Supply Company Quote
Notably, Tractor Supply lagged both top and bottom lines in second-quarter 2017, following in-line earnings in the first quarter. Further, margins remained under pressure mainly due to higher freight expenses and increased SG&A costs. These factors along with an unimpressive first-half performance led management to lower forecast for 2017.
Management now projects net sales in a band of $7.13-$7.19 billion and comps growth in a range of 1.1-1.7%. The updated comps view includes a negative impact of about 30% from deflation. Gross margin is anticipated to be flat to down in 2017, owing to the dismal numbers in the first half. Moreover, Tractor Supply envisions earnings per share in a band of $3.22-$3.27.
Other Headwinds
The challenging economic backdrop at the agricultural and energy sectors has been taking a toll on consumer spending, which is hurting Tractor Supply’s performance. Moreover, the company’s highly seasonal business calls for solid top and bottom-line results in the spring and winter selling seasons on the back of seasonal demand for merchandise offering.
Consequently, an unseasonable weather significantly dents the company’s performance and hurt margins. Moreover, volatility in raw material prices, higher promotional activity and stiff competition add to the woes.
Conclusion
While Tractor Supply’s growth prospects and optimism for the spring season are noteworthy, we cannot ignore the current trends in the agricultural sector and its dependence on seasons. So, let’s see if Tractor Supply’s initiatives can help it tide over the current trends.
Still Interested in Retail? See These Trending Picks
Better-ranked stocks in the same industry include Five Below Inc. (FIVE - Free Report) , Build-A-Bear Workshop, Inc. (BBW - Free Report) and Sally Beauty Holdings, Inc. (SBH - 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.
Five Below has a long-term EPS growth rate of 28.5%. Further, the stock has returned 24.1% year to date.
Build-A-Bear has delivered an average positive earnings surprise of 73.7% in the trailing four quarters. Moreover, it has a long-term earnings growth rate of 18%.
Sally Beauty has improved 5.3% in the last three months. Further, the company has a long-term EPS growth rate of 5.6%.
New Report: An Investor’s Guide to Cybersecurity
Cyberattacks have become more frequent and destructive than ever. In fact, they’re expected to cause $6 trillion per year in damage by 2020.
The cybersecurity industry is expanding quickly in response to these threats. In fact, a projected $170 billion per year will be spent to protect consumer and corporate assets. Zacks has just released Cybersecurity: An Investor’s Guide to Locking Down Profits which reveals 4 promising investment candidates.
Download the new report now>>