Shares of Tractor Supply Co. (TSCO), a leading retail farm and ranch store brand, jumped approximately 4.89% to $66.88 as the company recorded another solid quarter. Tractor announced second quarter of fiscal 2010 sales and same-store sales results on the heels of good inventory and markdown management. Tractor has also boosted its 2010 outlook.
Sales Trends
Strong performance in consumable, usable and edible categories — for instance, pet food and animal feed — acted as a catalyst for a 6.9% increase in traffic trends. This bolstered same-store sales growth of 6.1% from a decrease of 2.7% in the prior-year quarter. Tractor Supply has been witnessing increasing trends in same-store sales. After waning 5.1% in the third quarter of fiscal 2009, it leaped 0.7% and 2.8% in the fourth and first quarters, respectively.
Tractor Supply suffered setbacks in the recession as buyers avoided big-ticket purchases such as mowers, but results have improved in the recent quarter. Tractor Supply’s impressive merchandising improvement strategy and solid same store sales trend resulted in a double-digit top-line growth of the company. Net sales in the quarter surged 12.6% to $1070 million from $946.5 million in the prior-year quarter.
Outlook
Tractor Supply expects the double-digit top-line growth and strong same-store sales escalation should result in net income in the range of $75.6−$76.7 million or earnings per share of $2.03−$2.05. This represents a net income growth of around 39.1% and earnings growth of 36.0% on $54.8 million and $1.50, respectively, in the prior year.
Tractor is well positioned to capitalize on positive long-term trends. The company now expects sales for fiscal 2010 to range between $3.49−$3.53 billion compared with the previous estimate of $3.44−$3.50 billion. Same-store sales are now expected to improve 2.5% to 3.5%, compared with the previous guidance of 1% to 3%.
On the back of perked up results and brighter sales trends, Tractor Supply expects to earn net income per share in the range of $4.00−$4.10, well above previous guidance range of $3.48−$3.60 per share.
Estimate Trend Revision
The Zacks Consensus Estimate on Tractor Supply’s earnings for the fiscal year ending December 2010 is currently pegged at $3.72 per share. For the current year, the Zacks Consensus Estimate has moved up by 1 cent in the last 30 days as 2 out of 20 analysts covering the stock increased their projections, while none of the analysts lowered their estimates.
The Zacks Consensus Estimate for the second quarter increased 1 cent as 2 out of 19 analysts increased their estimate, while 1 moved in the opposite direction.
Considering earnings surprises, the stock has been steady over the last four quarters, with positive surprises ranging between a low of 0.67% and a high of 18.18%. The average remained positive at 7.31%. This implies that Tractor Supply has surpassed the Zacks Consensus Estimate by 7.31% over said period.
Tractor Supply is expected to deliver a profitable quarter in the face of a persistent torpid global economy. In spite of the present economic conditions, underlying trends of the company remain quite promising.
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