Tractor Supply Downgraded Amid Weak Sales Outlook
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 15 2024
0mins
Should l Buy TSCO?
Source: SeekingAlpha
Tractor Supply Co (TSCO) saw a price increase of 4.47% as it reached a 20-day high.
However, the stock was downgraded from Buy to Hold by Truist Securities, with analyst Scot Ciccarelli citing that sales have consistently fallen short of expectations, indicating weak market demand. The analyst also warned that flat same-store sales in Q4 suggest that 2026 could mark the fourth consecutive year of growth below the 3%-5% target, reflecting increasing competitive pressures. Additionally, the price target was cut from $67 to $55, indicating a cautious outlook on future performance, especially with the upcoming earnings report on January 29, where revenue expectations are set at $15.6 billion and EPS at $2.11, following a trend of missing revenue expectations in 11 of the last 12 quarters.
This downgrade raises concerns about Tractor Supply's ability to meet growth targets, especially in a competitive environment, and investors will be closely watching the upcoming earnings report for any signs of improvement.
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Analyst Views on TSCO
Wall Street analysts forecast TSCO stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for TSCO is 59.82 USD with a low forecast of 6.92 USD and a high forecast of 70.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
20 Analyst Rating
13 Buy
7 Hold
0 Sell
Moderate Buy
Current: 54.480
Low
6.92
Averages
59.82
High
70.00
Current: 54.480
Low
6.92
Averages
59.82
High
70.00
About TSCO
Tractor Supply Company is a rural lifestyle retailer in the United States. The Company is focused on supplying the needs of recreational farmers and ranchers. It operates retail stores under the names Tractor Supply Company and Petsense by Tractor Supply. Its stores are located in towns outlying various metropolitan markets and in rural communities. It also offers an expanded assortment of products through the Tractor Supply mobile application and online at TractorSupply.com and Petsense.com. The Company's selection of merchandise consists of various product categories, including livestock, equine and agriculture; companion animal; seasonal and recreation; truck, tool, and hardware, and clothing, gift, and decor. Its brands consist of 4health, American Farmworks, Bit & Bridle, Blue Mountain, C.E. Schmidt, Country Lane, Countyline, Country Tuff, Dumor, Farm Table, Groundwork, Huskee, and JobSmart.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Impact of Bankruptcies: Last year, 32 retailers filed for bankruptcy, leading to significant store closures; however, affluent consumers continued to support retail growth, highlighting the ongoing K-shaped recovery in the economy.
- Tightening Real Estate Market: With a slowdown in bankruptcies, retail real estate demand is expected to tighten, particularly in major retail markets, as retailers compete for limited commercial space, potentially leading to rising rents in the coming years.
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- Increase in New Openings: According to Coresight Research, U.S. retailers are expected to open about 5,500 new stores in 2026, a 4.4% increase year-over-year, indicating the continued appeal of value-focused retailers in attracting consumer spending.
- Supply and Demand Dynamics: As demand for retail space rises and supply diminishes, developers may find renewed opportunities to construct new strip malls, potentially revitalizing the retail landscape and driving future growth.
- Economic Factors at Play: Coresight's global research head anticipates that while high inflation and a sluggish housing market continue to impact retail, these economic pressures are expected to ease over the coming year, leading to improved real estate plans for retailers.
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- Market Dynamics Observation: Changes in the overall market environment and economic data may also impact analysts' rating decisions, requiring investors to remain vigilant to address potential market risks.
See More
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- Earnings and Revenue Decline: Tractor Supply Company reported fourth-quarter earnings per share of 43 cents, missing the analyst consensus estimate of 47 cents, with quarterly sales of $3.898 billion falling short of the $4 billion expectation, indicating a shift in consumer spending trends.
- Management Commentary: CEO Hal Lawton noted that while essential categories remained resilient, discretionary demand has moderated, reflecting changes in the market environment that may impact future sales strategies.
- Adjusted Future Outlook: The company expects fiscal 2026 GAAP earnings to range between $2.13 and $2.23 per share, lower than the $2.32 analyst estimate, with projected net sales growth of 4% to 6% and comparable store sales growth of 1% to 3%, indicating a cautious outlook on future growth.
- Analyst Rating Changes: Following the earnings announcement, several analysts adjusted their price targets for Tractor Supply, with Telsey lowering from $70 to $63, Mizuho from $65 to $58, and Piper Sandler from $67 to $59, reflecting market concerns about the company's future performance.
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