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Here’s Why Investors Should Buy Tractor Supply (TSCO) Now


Tractor Supply Company TSCO is gaining significantly from its solid omni-channel endeavors and overwhelming surprise history. The company targets integration of physical and digital operations to offer consumers a seamless shopping experience through the ‘ONETractor’ initiative. In first-quarter 2019, it delivered a fourth straight quarter of top- and bottom-line beat.

Back by these positives, shares of this Zacks Rank #2 (Buy) stock have surged 40.9% in a year, outperforming the industry’s 19.6% rally.

Analysts’ optimism on the stock is also reflected in the company’s positive earnings estimate revisions over the past 30 days. The Zacks Consensus Estimate of $4.76 for 2019 and $5.27 for 2020 has moved up 5 cents and 4 cents, respectively. Further, the company’s impressive long-term expected earnings growth rate of 11.4% instills confidence in the stock.

Let’s Delve Deep

Tractor Supply delivered robust double-digit e-commerce sales growth for 27th straight quarter in the first quarter, courtesy of gains from its ‘ONETractor’ initiative. Furthermore, the company is reaping significant benefits from its Buy Online Pick Up in Store program besides expanding its Neighbor’s Club loyalty program. Apparently, the company surpassed its targeted membership growth goals in 2018.

The company also remains well on track to expand its stockyard in-store kiosk and enhance its mobile POS technologies that are likely to generate incremental sales. Apart from technological advancement, management is consistently focusing expansion of store base to increase traffic. Moreover, it leverages an extensive network of stores to penetrate into target markets, which in turn, enables it to generate healthy sales and gain market share.

In fact, the company is well positioned to expand store base, remaining on track to increase its domestic store to 2,500 in the long term. In 2019, Tractor Supply expects to open about 80 namesake stores. Clearly, the company remains focused on enhancing the omni-channel network and enriching consumers’ experience.

Furthermore, Tractor Supply acquired Petsense LLC, a leading specialty retailer of pet supplies and services, to fortify its presence in the flourishing pet specialty space. The company completed system and process integration during 2018, by applying the best practices from Tractor Supply to Petsense. Its focus on expanding the Petsense format in certain geographic markets is an added positive. Additionally, the Petsense stores are focusing on building long-term customer loyalty by using digital marketing methods to engage customers, revamp the website and enhance customer rewards program. In 2019, Tractor Supply intends to open nearly 10-15 Petsense stores.

Meanwhile, Tractor Supply has been witnessing higher store transaction count, and comparable average ticket and traffic, which are providing a boost to its comparable-store sales (comps). In fact, comps are benefiting from improvement across all geographic regions and major product categories as well as strength in everyday merchandise groups. Going into the second quarter, management remains confident about gaining from the spring selling season.

Other Key Picks in the Same Space

Regis Corporation RGS delivered a positive earnings surprise of 250.7% in the last four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bed Bath & Beyond Inc. BBBY outpaced the earnings estimates in three of the trailing four quarters. The company carries a Zacks Rank of 2.

Hibbett Sports, Inc. HIBB is also a Zacks Ranked #2 stock, which reported a positive earnings surprise of 50% in the last reported quarter.

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