Tractor Supply Company (TSCO Quick QuoteTSCO - Free Report) has been gaining from strong demand for everyday merchandise, including consumable, usable and edible products, as well as robust winter seasonal categories. Strength in Life Out Here Strategy, along with its e-commerce business and Neighbor's Club loyalty program, also bodes well.

This led to robust first-quarter 2022 results, wherein the top and bottom lines improved year over year and surpassed the Zacks Consensus Estimate. This marked the ninth straight quarter of an earnings surprise and the eighth consecutive sales beat. Consequently, shares of TSCO have lost 18.1% in the past three months compared with the industry’s decline of 20.8%.

That said, let’s delve deeper into the factors driving this Zacks Rank #3 (Hold) stock.

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Factors Narrating TSCO’s Growth Story

Tractor Supply is progressing well with its Life Out Here Strategy, which is based on five key pillars, including customers, digitization, execution, team members and total shareholder return. Earlier, the company launched the Field Activity Support Team, and implemented various technology and service enhancements across the enterprise.

It is also on track with Project Fusion remodels and Side Lot transformation to remain nationally strong and locally relevant by bringing the latest merchandising strategies to life. Management anticipates transforming the side lots in 100 locations in 2022. These have been significant investments in stores. These are expected to boost productivity across the existing and new stores.

As part of the above-mentioned efforts, management revised the long-term financial growth targets for 2022-2026. It envisions achieving net sales growth of 6-7% for the aforementioned period, while comps are expected to grow 4-5%. The operating margin is expected to be 10.1-10.6%, up from the earlier mentioned 9-9.5%. Earnings per share are likely to grow 8-11%, up from the previously stated 8-10%.

Tractor Supply remains on track with its store-opening initiatives to induce traffic and drive the top line. It plans to open 75-80 Tractor Supply stores and 10 Petsense stores in 2022. Given the changing consumer trends, the company remains focused on integrating its physical and digital operations to offer consumers a seamless shopping experience. It is on track with the ‘ONETractor’ strategy, aimed at connecting store and online shopping.

The company’s omni-channel investments include curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app. Its Neighbor's Club loyalty program looks promising. Management is likely to reach more than $2 billion in sales by 2026.

Driven by the above-mentioned factors, management expects net sales of $13.6-$13.8 billion for 2022. Comps are likely to grow 3-4.5%. The operating margin is anticipated to be 10.1-10.3%. Net income is expected to be $1.04-$1.08 billion. Earnings per share are likely to be $9.20-$9.50. The view does not include the impacts of the Orscheln Farm acquisition, as it is currently subjected to customary closing conditions. The 2022 guidance includes an additional week or 53rd week, which is likely to contribute to sales and earnings to the tune of 1.5 percentage points and 15 cents, respectively.

In a recent development, the company issued the second-quarter 2022 outlook, wherein net sales are expected to grow 8%, with year-over-year comparable store sales growth of 5%. Adjusted earnings are envisioned to be $3.48 or greater. The upbeat guidance can be attributable to improved weather from April and robust sales of its seasonal products.

Wrapping Up

Despite the upsides, TSCO is reeling under higher product cost inflation, rising transportation costs and supply-chain constraints. The company has also been witnessing increased investments in the Life Out Here strategic efforts.

All said, online strength, solid demand and well-chalked-out endeavors are likely to help the stock sustain its momentum.

Notably, the Zacks Consensus Estimate for the company’s current financial year’s sales and earnings suggests growth of 8.2% and 10.6%, respectively, from the year-ago period’s reported numbers. Topping it, earnings estimates for 2022 have moved up 0.2% in the past 30 days. Also, a long-term earnings growth rate of 10.1% reflects its inherent strength.

Stocks to Consider

Here are three better-ranked stocks to consider — Boot Barn Holdings (BOOT Quick QuoteBOOT - Free Report) , Dillard’s (DDS Quick QuoteDDS - Free Report) and Canada Goose (GOOS Quick QuoteGOOS - Free Report) .

Dillard’s operates as a departmental store chain, featuring fashion apparel and home furnishings. It presently sports a Zacks Rank #1 (Strong Buy). DDS has a trailing four-quarter earnings surprise of 224.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard’s current financial-year sales suggests growth of 6.1% from the year-ago period’s reported number, while the same for EPS indicates a decline of 33.9%. DDS has an expected EPS growth rate of 12.6% for three-five years.

Boot Barn, which provides western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 25.2%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 17% and 4.4%, respectively, from the year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Canada Goose is the designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It currently carries a Zacks Rank #2. GOOS has a trailing four-quarter earnings surprise of 65.9%, on average.

The Zacks Consensus Estimate for Canada Goose’s current financial year’s EPS suggests growth of 64.4% from the year-ago period’s reported figure. GOOS has an expected EPS growth rate of 27.4% for three-five years.