Key Takeaways
- Tractor Supply shares gained 4% today after third-quarter sales of $3.91 billion and EPS of $0.43 both beat estimates.
- The beat didn’t matter much because gross margin fell to 36.4% from 37.4%, and operating income dropped 10%.
- Comparable sales got stronger through September, but the company kept its full-year outlook instead of raising it.
- The stock already traded well below its five-year average multiple, and the winter quarter is the next test.
Tractor Supply (TSCO) beat Wall Street’s estimates on sales and earnings before the open, and the stock was initially down 8% before rallying and now settling at about +4%.
CEO Hal Lawton called the third quarter “a step forward for Tractor Supply, with improved sales momentum and broader strength across our business.”
Investors cared more about the margins.
A beat on paper
The headline numbers looked fine:
- Sales rose 5.1% to $3.91 billion, ahead of the $3.82 billion analysts expected.
- EPS of $0.43 topped the $0.41 consensus, though it fell from $0.49 a year ago.
- Comparable store sales rose just 0.4%, on top of 3.9% growth a year ago.
Most of the sales growth came from new stores and the VIP Petcare acquisition, since comparable sales barely moved.
Margins did some damage
Gross margin for the quarter fell a full percentage point to 36.4%, from 37.4% a year ago. Management put most of that on higher transportation and fuel costs, plus investments to keep its prices competitive.
It’s a setback after years of steady gains, from 35.0% in 2022 to 36.4% last year…
SG&A also rose to 28.6% of sales from 28.1%, on weaker comps and startup costs for a new distribution center. Put it together, and operating income fell 10.2% to $307.7 million, even though sales grew 5%.
TIKR tracks 30 analysts on Tractor Supply. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Tractor Supply, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Tractor Supply’s Analyst Ratings
The outlook held, and that’s all
Comparable sales improved as the quarter went on: negative in July, modestly positive in August and stronger again in September.
But Tractor Supply only reaffirmed its full-year outlook, which still calls for comparable sales of -1% to flat and adjusted EPS of $1.90 to $2.00. With comps down 0.3% through nine months, that range leaves room for a fourth quarter anywhere from down about 3% to up about 1%.
Analysts already expected earnings to dip this year…
…and an unchanged outlook gives them little reason to raise those numbers. They don’t see earnings getting back above 2025’s level until 2028.
Of course, if September’s strength carries through the winter, the fourth-quarter report early next year could be the one that turns it around.
So what is Tractor Supply stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
