Tractor Supply Upgraded To Outperform, Wedbush Sees Good Risk-Reward
Tractor Supply Company (NASDAQ: TSCO) may generate better comps and earnings growth in 2017 than it did in 2016, Wedbush’s Seth Basham said in a report. He upgraded the rating on the company from Neutral to Outperform, while raising the price target from $65 to $85.
Basham mentioned that normalizing weather conditions, rising consumer confidence, the commencement of growth in the oil economy and an improved outlook for the farm economy supported expectations of better comps and underlying earnings growth at Tractor Supply in 2017.
Comps Outlook
A cold December had resulted in an upward revision of the Q4 2016 comps estimate from 2.0 percent to 2.5 percent, versus the consensus expectation of 1.8 percent. The estimate for 2017 had been raised from 2.5 percent to 3.0 percent, versus the current consensus expectation of 2.2 percent.
“We believe investors will look through a comparison-driven soft 1Q to better results through the balance of 2017,” Basham wrote.
The EPS estimate for 2017 has been raised from $3.51 to $3.56, with a forecast for underlying EPS growth of ~12.5 percent.
“Given the company’s conservative nature, we do not expect 2017 guidance provided with 4Q16 results on February 1 to quite reach these levels,” the analyst commented.
Comps eased significantly in November and December, with weakness in seasonal larger ticket items. This suggests a sequential improvement in comps in Q4 2016.
“While shares have already bounced off the bottom and 1Q17 consensus estimates appear aggressive, we see a favorable risk/reward,” Basham added.
Latest Ratings for TSCO
Jan 2017 | Wedbush | Upgrades | Neutral | Outperform |
Jan 2017 | Loop Capital | Initiates Coverage On | Hold | |
Oct 2016 | Argus Research | Downgrades | Buy | Hold |
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