Does Tractor Supply Stock Have What It Takes to Be in Your Portfolio?
Founded in 1938, Tractor Supply Company (TSCO) is the largest rural lifestyle retailer in the U.S. The company operates retail stores under the names Tractor Supply Company, Del’s Feed & Farm Supply, and Petsense, and operates websites under the names TractorSupply.com and Petsense.com. TSCO’s merchandise consists of various product categories, including farm and ranch, pet, outdoor living, clothing, smart home, horse, sporting goods, and lawn and garden.
With strong fundamentals and focus on its e-commerce website, TSCO has been able to recover from its all-time low of $63.89, which it hit on March 17 last year. The stock has since gained 125.5%. For the third quarter ended September 26, 2020, the company’s e-commerce sales experienced triple-digit percentage growth. Moreover, TESCO had robust store sales growth across all geographies.
TSCO believes its ‘Life Out Here’ strategy will create sustainable shareholder values. For the strategy, TSCO has prioritized five foundational pillars centered on customers, digitization, execution, team members, and total shareholder return.
Investors’ optimism and potential upside based on several factors have helped the stock earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates TSCO:
Trade Grade: A
TSCO is currently trading above its 50-day and 200-day moving averages of $146.96 and $143.28, respectively, representing an uptrend. Also, TSCO has gained 11.8% over the past three months, reflecting short-term bullishness.
The company is scheduled to release its fourth quarter and fiscal year 2020 results before the market opens tomorrow. Its net sales increased 31.4% year-over-year to $2.61 billion for the third quarter ended September 26, 2020. Comparable store sales increased 26.8% year-over-year. Its gross profit increased 36.5% year-over-year to $947.96 million. And its net income increased more than 56% year-over-year to $190.61 million, yielding EPS of $1.62, which 58.8% year-over-year.
Yesterday, TSCO announced the appointment of Matthew Rubin as the Senior Vice President and General Manager of Petsense, effective on February 1 In December, TSCO announced that it had exceeded its 25% carbon emissions reduction goal five years ahead of schedule. It also announced its new distribution center in Navarre, Ohio. Construction of the center is scheduled to begin in April and is expected to be completed by the fall of 2022.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers , TSCO is well positioned. The stock is currently trading just 5.6% below its 52-week high of $160.83, which it hit on January 15.
The company’s net revenue has grown at a CAGR of 11.2% over the past three years, while its EBITDA increased at a CAGR of 14.7% over the same period. Its EPS increased at a CAGR of 24% over the past three years. This can be attributed to the company’s continued innovations with a focus on product localization.
Peer Grade: B
TSCO is currently ranked #1 out of 43 stocks in the Specialty Retailers industry. Other popular stocks in the specialty retailers group are Collectors Universe, Inc. (CLCT), Rent-A-Center Inc. (RCII), and Ulta Beauty, Inc. (ULTA).
CLCT beat TSCO, gaining 274.6% over the past year, while RCII and ULTA have returned 53.3% and 8.3%, respectively, over the same period.
Industry Rank: B
The Specialty Retailers industry is ranked #66 of the 123 StockNews.com industries. The companies in this industry, which offers an assortment of goods from office supplies, video games, books, health supplements, and beauty supplies, among others, are known for their unique offerings.
Because the coronavirus pandemic accelerated the growth of e-commerce platforms, companies that were able to focus on online services generated huge returns. This industry is expected to witness a steady demand in the coming months also. .
Overall POWR Rating: A (Strong Buy)
TSCO is rated “Strong Buy” due to its short-and-long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.
Bottom Line
TSCO has gained 62.3% over the past year leveraging its physical store assets with a focus on rapid digitalization. The company has the potential to advance in the coming months, we think, based on its unique offerings, favorable earnings and revenue outlook, strong financials, and favorable analyst sentiment.
Analyst sentiment is good for TSCO. It has an average broker rating of 1.71. Also, TSCO’s earnings surprise history looks impressive with the company missing the consensus estimate in just one of the trailing four quarters. A consensus revenue estimate of $2.3 billion for the quarter ending March 31, 2021 represents 17.2% growth from the same period last year. Its EPS is expected to grow 24.8% for the quarter ended December 31, 2020, and at a rate of 15.7% per annum over the next five years.
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TSCO shares were trading at $150.50 per share on Wednesday afternoon, down $1.39 (-0.92%). Year-to-date, TSCO has gained 7.06%, versus a 1.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…
