Stock (Symbol) |
Tractor Supply (TSCO) |
Stock Price |
$86 |
Sector |
| Retail & Travel |
Data is as of |
| August 15, 2016 |
Expected to Report |
| Oct 19 |
Company Description |
 Tractor Supply Company is an operator of rural lifestyle retail stores in the United States. The Company focuses on supplying the lifestyle needs of recreational farmers and ranchers, as well as tradesmen and small businesses. As of December 27, 2014, it operated 1,382 retail stores in 49 states under the names Tractor Supply Company, Del’s Feed & Farm Supply and HomeTown Pet. It also operates a Website under the name TractorSupply.com. It offers a portfolio of products, which include equine, livestock, pet and small animal products; hardware, truck, towing and tool products; seasonal products, including lawn and garden items, power equipment, gifts and toys; work/recreational clothing and footwear, and maintenance products for agricultural and rural use. Its products are offered under various brands, which include 4health, Blue Mountain, Countyline, Equistages, Groundwork, Huskee, JobSmart, Dumor, C.E. Schmidt, Paws & Claws, Producer’s Pride and Redstone, among others. Source: Thomson Financial |
Sharek’s Take |
 Tractor Supply (TSCO) is down from $84 to $70 today after management pre-announced lowered profit estimates. TSCO was expected to make $0.72 vs $0.64 = 13% profit growth this qtr and lowered it to $0.66 vs $0.64 = 3% growth. The company had missed estimates by around 10 cents a share in 2 of the last 3 qtrs before this announcement, with weather being the excuse then. Wall Street shrugged the prior bad news off and kept the stock afloat to the tune of 26x earnings for a 15% grower (Est. LTG). Now with another miss the multiple has come down to 22x revised 2016 profit estimates of $3.24 which the company just gave. This is a solid well-run company, and I will look to add the stock to the Growth Portfolio. But for now, I want to wait. Same store sales growth is a key indicator for a retail stock, and growth is expected to be flat this qtr, thus I don’t see the stock going anywhere. When business is clicking, TSCO’s combination of store growth of 7% to 8% per year, same store sales growth of 3% to 4%, expanding profit margins, and stock buybacks could produce profit growth in the high-teens. Management projects expanding from 1,500 locations to 2,500 long-term as it grows from the Midwest & South to the West and populated Northeast. This is a solid selection for both growth investors and conservative ones, but right now there’s weakness in Texas due to lower oil prices and TSCO needs time to get its groove back. |
One Year Chart |
 Ok…so these charts and tables are from last qtr (8/14) when the stock was $86. I was thinking of adding TSCO to the Growth Portfolio the past few weeks (luckily I waited). Note the +1% and +4% profit growth in two of the past three qtrs, and this qtr is gonna be around +3%. Those aren’t good numbers, and I’m guessing the Est LTG will come down soon. Still, this company has grown profits every year since 2008, so let’s not get too negative here. |
Fair Value |
 Last qtr I said “I felt TSCO has been overvalued for years. Obviously I have been wrong as the stock has gone much higher.” Now with the P/E at 22 after today TSCO is a good value. But when the company officially reports earnings in three weeks I will probably take the Fair Value P/E down to between 22 and 24. |
Bottom Line |
 Tractor Supply is having issues like most retailers, but does have loyal shoppers who use the store on a continuous basis to purchase farming supplies and more. This stock has a recipe for success: mid-teens growth (historically), a dividend and a stock buyback program. After today’s drop I like Tractor Supply even more — the stock sells for just 19x 2017 est. TSCO ranks 19th of 36 stocks in the Conservative Growth Portfolio Power Rankings and the stock on the radar for the Growth Portfolio. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 19 of 36 |
