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Tractor Supply (TSCO) Q3 Earnings: Stock to Disappoint?


Farm and ranch store retailer, Tractor Supply Company TSCO is slated to report third-quarter 2016 results on Oct 19. In the last quarter, the company’s earnings met the Zacks Consensus Estimate, having outperformed the same by an average of nearly 3% over the trailing four quarters. Let’s see how things are shaping up for this announcement.

TRACTOR SUPPLY Price and EPS Surprise


Factors Influencing This Quarter

Though Tractor Supply has either met or topped estimates in the past four quarters, the picture doesn’t appear very rosy for its upcoming results. This is because the company has been battling a challenging economic backdrop that in turn is taking a toll on consumer spending, and weighing on the agricultural and energy sectors. Falling prey to these trends, Tractor Supply recently provided a soft third-quarter 2016 guidance based on its quarter-to-date performance, following which it also trimmed its full-year 2016 projections.

The company’s quarter-to-date results were impacted by the lower transaction count in the agriculture and energy sectors, which weighed on the sales and comparable store sales (comps) results for the quarter. Additionally, the company witnessed soft demand for pre-season heating products, like heating fuel and wood stoves, due to a persistent drop in the production of gas, coal and oil.

Consequently, Tractor Supply projected third-quarter net sales in the band of $1.54–$1.55 billion, marking a nearly 4.2%–5.0% rise from $1.48 billion recorded in the prior-year quarter. Comps for the quarter are estimated in the range of flat to down 1%, against a 2.9% increase recorded in the year-ago quarter. Due to lower sales, the company stated that it envisions net income per diluted share in the band of 65–67 cents. All these factors make us somewhat apprehensive about the company’s upcoming results.

Earnings Whispers

Our proven model does not conclusively show that Tractor Supply is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Tractor Supply currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 66 cents.

Zacks Rank: Tractor Supply carries a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Crown Castle International Corp. CCI, scheduled to release earnings on Oct 20, 2016, currently has an Earnings ESP of +1.77% and a Zacks Rank #1 (Strong Buy).

Big 5 Sporting Goods Corp. BGFV, expected to report earnings on Oct 25, 2016, currently has an Earnings ESP of +3.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amazon.com, Inc. AMZN, expected to release earnings on Oct 27, 2016, currently has an Earnings ESP of +6.98% and a Zacks Rank #1.

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