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Will Soft Comps Hurt Tractor Supply's (TSCO) Q1 Earnings?

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Tractor Supply Company (TSCO - Free Report) is slated to report first-quarter 2017 results on Apr 26. The big question facing investors is whether this farm and ranch store retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

Last quarter, the company reported an earnings surprise of 2.2%. Moreover, the bottom line has outperformed the Zacks Consensus Estimate by an average of 3.1% in the trailing four quarters. Let’s see how things are shaping up for this announcement.

Tractor Supply Company Price and EPS Surprise

 

Tractor Supply Company Price and EPS Surprise | Tractor Supply Company Quote

Factors Influencing This Quarter

Tractor Supply remains well poised for growth given its smooth progress on store expansion and technological advancements. The company remains on track with initiatives, which enable it to generate healthy sales and gain market share.

However, the company’s recent update on first-quarter 2017 remains soft as comparable store sales (comps) declined 2.2% as against a 4.9% rise witnessed in the year-ago period. The fall in comps is attributable to a 1.4% and 0.9% dip in comparable transaction count and average ticket, respectively. Additionally, an unfavorable comparison from first-quarter 2016 due to an additional 53rd week in 2016 led to the dip. Consequently, each quarter in 2017 started a week later than the prior-year. On adjusting for this weekly shift, comps decreased 2.6%.

Further, comps were hurt by soft seasonal merchandise sales, along with deflationary pressure. This was somewhat compensated by favorable comps across the company’s Livestock and Pet categories. Region wise, unfavorable weather had maximum impact on the Northern areas, where the sales were most affected.

Consequently, management provided weak earnings per share view of 45–46 cents the first quarter. Further, estimates have been going down lately ahead of the company’s first-quarter earnings release. The Zacks Consensus Estimate for the first quarter declined 13.2% to 46 cents per share in the last seven days. Moreover, the estimate for the quarter reflects an 8.2% decline from the prior-year quarter.

Additionally, we note that the shares of the company have declined 16% year to date, significantly wider than the Zacks categorized Retail – Miscellaneous industry’s fall of 1.2%. All these factors make us somewhat apprehensive about the company’s upcoming results.


Earnings Whispers

Our proven model does not conclusively show that Tractor Supply is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Tractor Supply currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 46 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Tractor Supply carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Panera Bread Company , scheduled to release earnings on Apr 25, currently has an Earnings ESP of +2.76% and a Zacks Rank #2 (Buy).

Pinnacle Foods Inc. , expected to report earnings on Apr 27, currently has an Earnings ESP of +2.17% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Newell Brands Inc. (NWL - Free Report) , slated to release earnings on May 8, currently has an Earnings ESP of +13.79% and a Zacks Rank #2.

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