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Tractor Supply Rises Over 20% YTD: What Should Investors Expect?
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Tractor Supply Company (TSCO - Free Report) has demonstrated impressive performance in the stock with a year-to-date (YTD) gain of 24.6%. This performance significantly outpaces the Zacks Retail - Miscellaneous industry which has seen a decline of 6%. TSCO has also outperformed the broader Retail-Wholesale sector, which increased 13.2%, and the S&P 500, which grew 18.4% in the same period.
Closing at $267.55, the Tractor Supply stock is trading at a 45% premium to its 52-week low of $185, showcasing strong upward momentum. Additionally, the stock is currently above its 50-day and 200-day moving averages, both of which are considered bullish signals for investors. This impressive performance can be largely attributed to the company's consistent market share expansion and positive customer trends.
The Zacks Consensus Estimate for earnings for the current fiscal year implies growth of 1.4% from the year-ago level, highlighting the company’s potential. The consensus estimated figure for the next fiscal year indicates year-over-year growth of 8.9%.
The Zacks Consensus Estimate figures for sales imply an increase of 2.4% and 5.7% for the current and next fiscal year, respectively.
This recent strong performance prompts investors to consider whether TSCO stock will maintain its upward trajectory or if it’s time to explore other opportunities. Now may be the moment for investors to decide whether to take an active approach or to remain patient and hold onto their shares. Let's analyze
Image Source: Zacks Investment Research
What’s Prompting TSCO’s Performance?
The largest rural lifestyle retailer in the United States is reaping the benefits attributed to several factors, including everyday low-price strategy and reduced transportation, which aided margins in second-quarter 2024. In the first half of 2024, TSCO’s performance has been consistent with the guidance, with positive comparable sales witnessed in the same time frame.
Tractor Supply is concentrating on its "Life Out Here" lifestyle assortment and convenient shopping format to attract customers and capture market share. This strategy is built on five key pillars: customers, digitization, execution, team members, and total shareholder return. The commitment toward this strategy for the second half of 2024 remains unwavering.
The strategic investments in Neighbor's Club, one of the top-tier loyalty programs, are proving to be a competitive advantage. This investment led to a notable increase in both customer count and retention. It had significantly expanded its Neighbor's Club offerings to reward members faster and reduce the spending for tier qualifications.
To adapt to changing consumer trends, Tractor Supply is integrating its physical and digital operations for a seamless shopping experience. The ‘ONETractor’ strategy connects in-store and online shopping. Recent investments include curbside pickup, same-day and next-day delivery, a revamped website, and a new mobile app. Moving forward, management aims to blend legendary in-store service with digital experiences through AI-driven personalization and enhanced search and checkout features.
Bumps in TSCO’s Pathway
While the company’s performance remains strong, Tractor Supply is not immune to the difficulties of the current economic landscape. TSCO has been dealing with higher SG&A expenses due to growth investments, including increased depreciation and amortization, the onboarding of a new distribution center and modestly deleveraged fixed costs. These challenges are partially mitigated by productivity improvements and disciplined cost control.
Despite improvements in consumer inflation, Tractor Supply faces challenges with high unemployment and subdued consumer sentiment. The ongoing shift in spending from goods to services has been a headwind for the company. Retail prices are expected to face headwinds from deflation in the upcoming third quarter of 2024, with some moderation in the fourth quarter, where the company will also contend with tough comparisons from the previous year's gross margin expansion.
TSCO’s Premium Valuation
With the stock steadily ticking up, the company is currently trading at a forward 12-month P/E multiple of 24.69X, exceeding the industry average of 16.15X. Currently, TSCO’s stock valuation seems pricey. Investors should carefully assess whether the company can continue to deliver results that justify the premium valuation, particularly in a potentially volatile market environment.
Given its premium valuation, we believe the investors should patiently wait for a better entry point for Tractor Supply, which currently carries a Zacks Rank #3 (Hold).
3 Retail Stocks to Consider
We have highlighted three better-ranked stocks in the broader sector, namely Abercrombie & Fitch Co. (ANF - Free Report) , Deckers (DECK - Free Report) , and DICK'S Sporting Goods (DKS - Free Report) .
The Zacks Consensus Estimate for ANF’s current financial-year sales and earnings indicates growth of 12.5% and 60.5%, respectively, from the year-ago reported figures. Abercrombie has a trailing four-quarter earnings surprise of 27.9%, on average.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 47.2% in each of the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales and earnings indicates growth of 11.5% and 8.4%, respectively, from the year-ago reported figures.
DICK'S Sporting operates as an omni-channel sporting goods retailer. It currently carries a Zacks Rank #2. DKS has a trailing four-quarter earnings surprise of 4.7%, on average.
The Zacks Consensus Estimate for DICK Sporting’s current fiscal-year sales and earnings implies growth of 1.9% and 6.9%, respectively, from the year-ago reported numbers.
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Tractor Supply Rises Over 20% YTD: What Should Investors Expect?
Tractor Supply Company (TSCO - Free Report) has demonstrated impressive performance in the stock with a year-to-date (YTD) gain of 24.6%. This performance significantly outpaces the Zacks Retail - Miscellaneous industry which has seen a decline of 6%. TSCO has also outperformed the broader Retail-Wholesale sector, which increased 13.2%, and the S&P 500, which grew 18.4% in the same period.
Closing at $267.55, the Tractor Supply stock is trading at a 45% premium to its 52-week low of $185, showcasing strong upward momentum. Additionally, the stock is currently above its 50-day and 200-day moving averages, both of which are considered bullish signals for investors. This impressive performance can be largely attributed to the company's consistent market share expansion and positive customer trends.
The Zacks Consensus Estimate for earnings for the current fiscal year implies growth of 1.4% from the year-ago level, highlighting the company’s potential. The consensus estimated figure for the next fiscal year indicates year-over-year growth of 8.9%.
The Zacks Consensus Estimate figures for sales imply an increase of 2.4% and 5.7% for the current and next fiscal year, respectively.
This recent strong performance prompts investors to consider whether TSCO stock will maintain its upward trajectory or if it’s time to explore other opportunities. Now may be the moment for investors to decide whether to take an active approach or to remain patient and hold onto their shares. Let's analyze
Image Source: Zacks Investment Research
What’s Prompting TSCO’s Performance?
The largest rural lifestyle retailer in the United States is reaping the benefits attributed to several factors, including everyday low-price strategy and reduced transportation, which aided margins in second-quarter 2024. In the first half of 2024, TSCO’s performance has been consistent with the guidance, with positive comparable sales witnessed in the same time frame.
Tractor Supply is concentrating on its "Life Out Here" lifestyle assortment and convenient shopping format to attract customers and capture market share. This strategy is built on five key pillars: customers, digitization, execution, team members, and total shareholder return. The commitment toward this strategy for the second half of 2024 remains unwavering.
The strategic investments in Neighbor's Club, one of the top-tier loyalty programs, are proving to be a competitive advantage. This investment led to a notable increase in both customer count and retention. It had significantly expanded its Neighbor's Club offerings to reward members faster and reduce the spending for tier qualifications.
To adapt to changing consumer trends, Tractor Supply is integrating its physical and digital operations for a seamless shopping experience. The ‘ONETractor’ strategy connects in-store and online shopping. Recent investments include curbside pickup, same-day and next-day delivery, a revamped website, and a new mobile app. Moving forward, management aims to blend legendary in-store service with digital experiences through AI-driven personalization and enhanced search and checkout features.
Bumps in TSCO’s Pathway
While the company’s performance remains strong, Tractor Supply is not immune to the difficulties of the current economic landscape. TSCO has been dealing with higher SG&A expenses due to growth investments, including increased depreciation and amortization, the onboarding of a new distribution center and modestly deleveraged fixed costs. These challenges are partially mitigated by productivity improvements and disciplined cost control.
Despite improvements in consumer inflation, Tractor Supply faces challenges with high unemployment and subdued consumer sentiment. The ongoing shift in spending from goods to services has been a headwind for the company. Retail prices are expected to face headwinds from deflation in the upcoming third quarter of 2024, with some moderation in the fourth quarter, where the company will also contend with tough comparisons from the previous year's gross margin expansion.
TSCO’s Premium Valuation
With the stock steadily ticking up, the company is currently trading at a forward 12-month P/E multiple of 24.69X, exceeding the industry average of 16.15X. Currently, TSCO’s stock valuation seems pricey. Investors should carefully assess whether the company can continue to deliver results that justify the premium valuation, particularly in a potentially volatile market environment.
Given its premium valuation, we believe the investors should patiently wait for a better entry point for Tractor Supply, which currently carries a Zacks Rank #3 (Hold).
3 Retail Stocks to Consider
We have highlighted three better-ranked stocks in the broader sector, namely Abercrombie & Fitch Co. (ANF - Free Report) , Deckers (DECK - Free Report) , and DICK'S Sporting Goods (DKS - Free Report) .
Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s current financial-year sales and earnings indicates growth of 12.5% and 60.5%, respectively, from the year-ago reported figures. Abercrombie has a trailing four-quarter earnings surprise of 27.9%, on average.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 47.2% in each of the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales and earnings indicates growth of 11.5% and 8.4%, respectively, from the year-ago reported figures.
DICK'S Sporting operates as an omni-channel sporting goods retailer. It currently carries a Zacks Rank #2. DKS has a trailing four-quarter earnings surprise of 4.7%, on average.
The Zacks Consensus Estimate for DICK Sporting’s current fiscal-year sales and earnings implies growth of 1.9% and 6.9%, respectively, from the year-ago reported numbers.