Tractor Supply (NASDAQ:TSCO) is on a six-day winning streak and set a record high Friday with gains fueled by the company’s Q1 results and upbeat earnings call in which management looks for extended profits and strong comparable same store sales going forward.
While the results initially generated a negative response from Wall Street, comments during the earnings call turned things around and launched shares higher on Friday morning with the company now expecting increased spending by mid- to high-income earners to appear earlier in the season.
“We believe part of the continued inflection in big ticket comps is driven by an expanded assortment with new products in Toro mowers, Weber grills and recreational vehicles,” Wedbush analyst Seth Basham said to justify a 15% hike in his price target.
Basham is positive on the resilience of the business and is comfortable with its guidance, but the elevated valuation and below-algorithm growth keeps his Neutral rating on Tractor Supply (TSCO) intact.
With the help of strong seasonal sales and new store openings, sales increased by 2.7% to set a record for the quarter of $3.4B but missed expectations by just $10M. Comparable store sales were up 1.1%, down from +2.1% in comparable store sales for the same quarter last year but much better than 0.5% expectations. This was also the first time TSCO has comped positively since Q2 2023. Gross profit margin increased 50 basis points to 36.0% due to lower transportation expenses, cost management, and low prices to lure in cost-conscious consumers. The average transaction price dropped 0.4% to $58.66.
Looking ahead to the end of the year, the company expects sales for the year of $14.7B to $15.1B compared to 2023 sales of $14.56B and the consensus estimate of $15B. Comparable store sales are seen down 1.0% to up 1.5%. The company’s operating margin is targeted for 9.7% to 10.5% and earnings of $9.85 to $10.50 per share, straddling the Street estimate of $10.24 per share.
The results and outlook for 2024 triggered a flurry of price target hikes with Goldman Sachs, UBS, Morgan Stanley, Raymond James, and BNP Paribas among those raising their targets by 6% to 20%.