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Tractor Supply (TSCO) Posts Q3 Earnings Beat, Sales Up Y/Y
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Tractor Supply Company (TSCO - Free Report) reported third-quarter 2020 results, wherein the top and the bottom lines improved year-on-year and also surpassed the Zacks Consensus Estimate. The company also provided its view for the fourth quarter.
Tractor Supply’s earnings came in at of $1.62 per share, which surpassed the Zacks Consensus Estimate of $1.38. Moreover, the bottom line improved 58.8% from the prior-year quarter’s figure.
Net sales increased 31.4% year over year to $ 2,606.6 million and beat the Zacks Consensus Estimate of $2,398 million. The improvement was driven by comparable store sales (comps) increase of 26.8%, led by growth of 12.5% in comparable average ticket and 14.3% in comparable average transaction count.
Comps growth was backed by strength in demand for summer seasonal categories as well as everyday merchandise, including consumable, usable and edible products. Further, robust comps growth at all of the company’s geographic regions aided results. Additionally, the company witnessed triple-digit sales growth in the e-commerce business.
Notably, shares of this Zacks Rank #3 (Hold) company have gained 56.9% in the past six months compared with the industry’s 36.2% growth.
Margins & Costs
Gross profit rose 36.6% year over year to $948 million, while gross margin expanded 138 basis points (bps) to 36.4%. Gross margin gained from lower depth and frequency of sales promotions, lower clearance activity, and reduced transportation costs as a percent of net sales.
Selling, general and administrative (SG&A) expenses — including depreciation and amortization — as a percentage of sales declined 14 bps to 26.7%. SG&A expenses benefited from leverage in occupancy, personnel as well as other operating costs due to higher comps, partly offset by incremental costs related to the pandemic. In dollar terms, SG&A expenses, including depreciation and amortization, rose 30.7% to $695.8 million.
Driven by higher sales and gross margin, operating income rose 55.9% to $ 252.2 million in the third quarter. Operating margin expanded 152 bps to 9.7%.
Tractor Supply Company Price, Consensus and EPS Surprise
The company provided details regarding its new ‘Life Out Here Strategy’. The strategy is essentially based on five key pillars which includes customers, digitization, execution, team members as well as total shareholder return. Some of the key initiatives undertaken to support the strategy include boosting space productivity, enhancing omni channel initiatives, evolution of Neighbor’s Club loyalty program as well as augmenting in-store merchandising execution.
As part of the Life Out Here Strategy, the company also provided long term financial growth targets for the upcoming three to five years. Accordingly management envisions achieving net sales growth in the bracket of 6-7%, while comps are expected to grow between 4-5%. Further, operating margin is expected in the range of 9-9.5% and earnings per share are expected to grow in the bracket of 8-10%.
Financial Position
Tractor Supply ended the quarter with cash and cash equivalents of $1,112 million, long-term debt of $529.3 million and total stockholders’ equity of $1,875.9 million. Further, it has no amounts drawn on its $500 million revolving credit facility as of Sep 26, 2020. This provides ample financial flexibility to the company to steer through the pandemic.
In the first nine months of 2020, it incurred capital expenditure of $161.3 million and generated cash flow from operating activities of $1,005 million. For 2020, it continues expects capital expenditure of $300-$325 million.
Store Update
In the quarter under review, Tractor Supply opened 23 Tractor Supply stores and three Petsense stores. As of Sep 26, the company operated 1,904 Tractor Supply stores across 49 states and 183 Petsense stores in 25 states.
Going ahead, management remains on track with its store-opening initiatives. It plans to open 80 new Tractor Supply stores and 10 Petsense stores in 2020.
Q4 Outlook
Tractor Supply continues to remain uncertain regarding the magnitude of the pandemics impact upon the company performance in 2020. Nevertheless, it has provided guidance for the fourth quarter.
The company expects net sales in the range of $2.6-$2.7 billion for the fourth quarter, with comps growth of 15-20%. Moreover, net income is likely to be $163-$175 million, while earnings per share are expected in the bracket of $1.37-$1.47. However, the company expects costs related to COVID-19 to hurt its business by $17-$20 million in the fourth quarter.
Additionally, costs related to the aforementioned Life Out Here Strategy is likely to be in the range of $12-$15 million during the fourth quarter. The company also expects to incur wage and benefit changes related costs of nearly $13 million.
Big Lots, Inc. (BIG - Free Report) has an expected long-term earnings growth rate of 4.5% and a Zacks Rank #2 (Buy).
Lowe's Companies, Inc. (LOW - Free Report) , with a Zacks Rank #2, has a trailing four-quarter average earnings surprise of 16.2%.
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Tractor Supply (TSCO) Posts Q3 Earnings Beat, Sales Up Y/Y
Tractor Supply Company (TSCO - Free Report) reported third-quarter 2020 results, wherein the top and the bottom lines improved year-on-year and also surpassed the Zacks Consensus Estimate. The company also provided its view for the fourth quarter.
Tractor Supply’s earnings came in at of $1.62 per share, which surpassed the Zacks Consensus Estimate of $1.38. Moreover, the bottom line improved 58.8% from the prior-year quarter’s figure.
Net sales increased 31.4% year over year to $ 2,606.6 million and beat the Zacks Consensus Estimate of $2,398 million. The improvement was driven by comparable store sales (comps) increase of 26.8%, led by growth of 12.5% in comparable average ticket and 14.3% in comparable average transaction count.
Comps growth was backed by strength in demand for summer seasonal categories as well as everyday merchandise, including consumable, usable and edible products. Further, robust comps growth at all of the company’s geographic regions aided results. Additionally, the company witnessed triple-digit sales growth in the e-commerce business.
Notably, shares of this Zacks Rank #3 (Hold) company have gained 56.9% in the past six months compared with the industry’s 36.2% growth.
Margins & Costs
Gross profit rose 36.6% year over year to $948 million, while gross margin expanded 138 basis points (bps) to 36.4%. Gross margin gained from lower depth and frequency of sales promotions, lower clearance activity, and reduced transportation costs as a percent of net sales.
Selling, general and administrative (SG&A) expenses — including depreciation and amortization — as a percentage of sales declined 14 bps to 26.7%. SG&A expenses benefited from leverage in occupancy, personnel as well as other operating costs due to higher comps, partly offset by incremental costs related to the pandemic. In dollar terms, SG&A expenses, including depreciation and amortization, rose 30.7% to $695.8 million.
Driven by higher sales and gross margin, operating income rose 55.9% to $ 252.2 million in the third quarter. Operating margin expanded 152 bps to 9.7%.
Tractor Supply Company Price, Consensus and EPS Surprise
Tractor Supply Company price-consensus-eps-surprise-chart | Tractor Supply Company Quote
Strategic Initiatives
The company provided details regarding its new ‘Life Out Here Strategy’. The strategy is essentially based on five key pillars which includes customers, digitization, execution, team members as well as total shareholder return. Some of the key initiatives undertaken to support the strategy include boosting space productivity, enhancing omni channel initiatives, evolution of Neighbor’s Club loyalty program as well as augmenting in-store merchandising execution.
As part of the Life Out Here Strategy, the company also provided long term financial growth targets for the upcoming three to five years. Accordingly management envisions achieving net sales growth in the bracket of 6-7%, while comps are expected to grow between 4-5%. Further, operating margin is expected in the range of 9-9.5% and earnings per share are expected to grow in the bracket of 8-10%.
Financial Position
Tractor Supply ended the quarter with cash and cash equivalents of $1,112 million, long-term debt of $529.3 million and total stockholders’ equity of $1,875.9 million. Further, it has no amounts drawn on its $500 million revolving credit facility as of Sep 26, 2020. This provides ample financial flexibility to the company to steer through the pandemic.
In the first nine months of 2020, it incurred capital expenditure of $161.3 million and generated cash flow from operating activities of $1,005 million. For 2020, it continues expects capital expenditure of $300-$325 million.
Store Update
In the quarter under review, Tractor Supply opened 23 Tractor Supply stores and three Petsense stores. As of Sep 26, the company operated 1,904 Tractor Supply stores across 49 states and 183 Petsense stores in 25 states.
Going ahead, management remains on track with its store-opening initiatives. It plans to open 80 new Tractor Supply stores and 10 Petsense stores in 2020.
Q4 Outlook
Tractor Supply continues to remain uncertain regarding the magnitude of the pandemics impact upon the company performance in 2020. Nevertheless, it has provided guidance for the fourth quarter.
The company expects net sales in the range of $2.6-$2.7 billion for the fourth quarter, with comps growth of 15-20%. Moreover, net income is likely to be $163-$175 million, while earnings per share are expected in the bracket of $1.37-$1.47. However, the company expects costs related to COVID-19 to hurt its business by $17-$20 million in the fourth quarter.
Additionally, costs related to the aforementioned Life Out Here Strategy is likely to be in the range of $12-$15 million during the fourth quarter. The company also expects to incur wage and benefit changes related costs of nearly $13 million.
3 Retail Stocks to Watch Out
Hibbett Sports, Inc. (HIBB - Free Report) , which flaunts a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 44.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Big Lots, Inc. (BIG - Free Report) has an expected long-term earnings growth rate of 4.5% and a Zacks Rank #2 (Buy).
Lowe's Companies, Inc. (LOW - Free Report) , with a Zacks Rank #2, has a trailing four-quarter average earnings surprise of 16.2%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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