Through The Fly's Eyes: Tractor Supply Company
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
They Don't Actually Sell Tractors
Specialty retailers, of course, should employ folks who understand the products they sell. There is a Brentwood, Tennessee outfit that staffs each of its stores with a horse owner, a farmer and a welder. Wonder what they offer? Read on.
Tractor Supply Company (TSCO) is a retail supplier of products for recreational farmers and ranchers. Offerings include tractor parts, fencing, animal feeds and medicines, tools, truck and trailer parts, garden products, riding mowers, and work clothes. The firm operates 698 stores in the U.S. and Canada. Outlets are generally located in rural areas and the outlying suburbs of cities. Major competitors are Home Depot (HD) and Sears Holdings (SHLD).
The company surprised the Street earlier in the week, when it guided Q1 EPS to 10-12 cents and Q1 revenues to $559.8 million. On average, analysts had been expecting break-even earnings and sales of $526.65 million. Management also said it expected FY07 EPS of $2.49-2.56 ($2.50 consensus) and FY07 revenues of $2.7-2.75 billion ($2.72B consensus).
Tractor Supply Company shares popped into the initial stage of a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with five "strong buys", five "buys" and nine "holds". Analysts see an eighteen percent average annual growth rate, through the next five years. The TSCO Price to Sales ratio (0.87), Price to Book ratio (3.44) and Return on Investment (15.57%) compare favorably with industry, sector and S&P 500 averages.
Institutions own about 94% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $38.75 and $66.20. A stop-loss of $48.40 looks good here. Note that the firm is expected to report Q1 results on April 25th, after the close.