On Friday, Tractor Supply Company (NASDAQ:TSCO) experienced a slight adjustment in its stock outlook. Telsey Advisory Group revised the price target for the retailer's shares to $300 from the previous $305. Despite this change, the firm maintained its Outperform rating on the stock.
The adjustment followed Tractor Supply's second quarter 2024 earnings report, which showed a 2.6% year-over-year increase in earnings per share (EPS) to $3.93. This performance aligned with Telsey's estimate and marginally surpassed the FactSet consensus of $3.92. The company's better-than-expected operating margin of 13.2% was a contributing factor, which benefited from reduced supply chain costs, disciplined cost management, and a sale-leaseback transaction involving two stores that provided approximately a 12-basis point advantage.
However, Tractor Supply's comparable store sales did not meet expectations, recording a 0.5% decrease compared to the anticipated 0.5% increase. Factors influencing this shortfall included the cycling of last year's inflationary benefits, a slight downturn in consumer spending on goods in favor of services, and adverse weather conditions. Moreover, an earlier Easter led to an estimated $15 million to $20 million in sales shifting from the second quarter to the first quarter of 2024.
Despite these challenges, Tractor Supply continued to report growth in market share and an expanding customer base. The company also updated its full-year 2024 EPS guidance, narrowing the range to $10.00-$10.40 from the previous forecast of $9.85-$10.50. The revised guidance suggests a slightly higher midpoint of $10.20, which, while improved, falls short of Telsey's estimate of $10.40 and the FactSet consensus of $10.39. This new outlook takes into account the softer sales but also recognizes 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 0.5% decline in comparable-store sales. The company's second-quarter earnings per share increased by 2.6% year-over-year to $3.93, slightly surpassing the FactSet consensus of $3.92. In response to these results, Telsey Advisory Group lowered its price target for the company to $300 from $305, while JPMorgan reduced its target to $260 from $263. On the other hand, Citi raised its target to $260 from $256, highlighting the company's consistent demand and growth in big-ticket categories.
These recent developments come as Tractor Supply adjusted its fiscal 2024 earnings per share guidance to a range of $10.00 to $10.40, reflecting softer sales projections but improved profitability. The company also expects net sales to range between $14.8 billion and $15 billion, with comparable store sales ranging from a decrease of 0.5% to an increase of 1%.
Finally, Tractor Supply continues to expand its operations, with the launch of 21 new stores and three Petsense locations. Additionally, the company's digital sales saw double-digit growth, and its Neighbor's Club loyalty program now boasts over 36 million members.
InvestingPro Insights
As Tractor Supply Company (NASDAQ:TSCO) navigates through a mixed financial landscape, real-time data and expert analysis can offer a clearer picture of the company's position. According to InvestingPro data, Tractor Supply has a market capitalization of $28.56 billion and is trading at a P/E ratio of 25.49, reflective of its current earnings. Notably, the company's Price / Book ratio stands at 12.38, indicating a premium valuation relative to its book value.
InvestingPro Tips highlight that Tractor Supply has a track record of raising its dividend, doing so for 14 consecutive years, which is a sign of the company's commitment to returning value to shareholders. Additionally, the company's cash flows are robust enough to cover interest payments, suggesting financial stability. For investors looking for more in-depth analysis, there are over 7 additional InvestingPro Tips available, which can be accessed by using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
While analysts have revised their earnings estimates downwards for the upcoming period, it's important to note that Tractor Supply is profitable over the last twelve months and has shown strong returns over the last decade. This historical performance, coupled with the company's ability to maintain dividends and liquid assets exceeding short-term obligations, could be key factors for investors considering the stock in light of recent earnings and sales figures.
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