On Friday, Telsey Advisory Group adjusted its price target for Tractor Supply Company (NASDAQ:TSCO), reducing it to $300 from the previous $305, while maintaining an Outperform rating on the stock.
The adjustment followed the company's second-quarter earnings report for 2024, which showed a 2.6% year-over-year increase in earnings per share (EPS) to $3.93. This performance met Telsey's estimates and slightly surpassed the FactSet consensus of $3.92.
Tractor Supply's operating margin for the quarter was reported at 13.2%, which was slightly better than Telsey's projection of 13.1%. The improvement in margin was attributed to lower supply chain costs, disciplined cost management, and a roughly 12 basis point benefit from the sale-leaseback of two stores. However, the company's comparable store sales (comp) fell short of expectations, declining by 0.5%, compared to Telsey's estimate of a 0.5% increase. Factors influencing the comp decline included lapping over last year’s inflationary benefits, approximately 1% retail price deflation in the second quarter, a cautious consumer sentiment, and a shift in consumer spending toward services rather than goods.
Sales were also impacted by weather conditions, with an unfavorably wet spring leading into a particularly hot summer by June. Additionally, an earlier Easter in 2024 shifted an estimated $15 million to $20 million in sales from the second quarter to the first quarter. On a positive note, Tractor Supply continued to experience market share gains and growth in its customer base.
For the full year 2024, Tractor Supply narrowed its EPS guidance to a range of $10.00 to $10.40, from the previous range of $9.85 to $10.50. The new guidance suggests a slightly higher midpoint of $10.20, compared to the previous $10.18, although it remains below Telsey's estimate of $10.40 and the FactSet consensus of $10.39. The updated guidance reflects softer sales projections but improved profitability for the company.
In other recent news, Tractor Supply Company reported a 1.5% increase in net sales for the second quarter of 2024, despite a slight decline of 0.5% in comparable-store sales. JPMorgan recently adjusted its outlook on Tractor Supply, lowering the price target to $260 from the previous $263, citing the company's financial performance meeting the lower end of expectations. On the other hand, Citi raised its price target for Tractor Supply to $260 from $256, acknowledging the company's consistent core demand and growth in big-ticket categories.
These developments come as Tractor Supply adjusted its fiscal 2024 guidance due to anticipated cautious customer spending, expecting net sales between $14.8 billion and $15 billion, with comparable store sales ranging from down 0.5% to up 1%. The company's Neighbor's Club loyalty program continues to thrive, boasting over 36 million members.
In addition to its financial performance, Tractor Supply saw double-digit growth in digital sales and opened a new distribution center in Arkansas as scheduled. The company also launched 21 new stores and three Petsense by Tractor Supply locations. These are among the recent developments within Tractor Supply Company.
InvestingPro Insights
In the wake of Telsey Advisory Group's price target adjustment for Tractor Supply Company (NASDAQ:TSCO), investors may consider additional insights from InvestingPro. Notably, Tractor Supply has demonstrated a commitment to shareholder returns, having increased its dividend for 14 consecutive years. This consistency is a testament to the company's financial stability and management's confidence in future performance. Additionally, despite some analysts revising their earnings expectations downward, Tractor Supply's cash flows remain robust, with the ability to comfortably cover interest payments, suggesting a solid financial structure.
From a valuation perspective, Tractor Supply's current P/E ratio stands at 25.34, reflecting a premium against near-term earnings growth. With a Price / Book ratio of 12.04 as of the last twelve months ending Q2 2024, the company is trading at a high multiple, which could signal that the market has high expectations for its asset value or profitability. Moreover, the company's dividend yield as of the latest data is 1.71%, combined with a 6.8% dividend growth, which may appeal to income-focused investors.
For those interested in deeper analysis, InvestingPro offers additional InvestingPro Tips on Tractor Supply Company, providing a broader context for investment decisions. By using the promo code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking access to exclusive insights and data. As of the latest update, there are 11 more InvestingPro Tips available that could further guide investors in their evaluation of Tractor Supply's stock performance and potential.
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