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E-Commerce Likely to Drive Tractor Supply's (TSCO) Q4 Earnings

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Zacks Equity Research
·5 min read
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Tractor Supply Company TSCO is slated to report fourth-quarter 2020 results on Jan 28, before the opening bell. This leading ranch store retailer is likely to have witnessed revenue and earnings growth in the to-be-reported quarter.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.52 per share, suggesting an increase of 25.6% from the year-ago period’s reported figure. Notably, the consensus mark has been raised by 4 cents in the past seven days. For fourth-quarter revenues, the consensus mark is pegged at $2.7 billion, suggesting 23.1% growth from the prior-year quarter’s reported figure.

In the last reported quarter, the company reported an earnings beat of 17.4%. Moreover, it delivered an earnings surprise of 7%, on average, in the trailing four quarters.

Tractor Supply Company Price and EPS Surprise 

Tractor Supply Company Price and EPS Surprise
Tractor Supply Company Price and EPS Surprise

Tractor Supply Company price-eps-surprise | Tractor Supply Company Quote

Factors to Note

Given the changing consumer trends, Tractor Supply has been benefiting from robust demand for seasonal categories as well as everyday merchandise, including consumable, usable and edible products, particularly in the online platform. The company’s omnichannel investments, including curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app, have been aiding its top-line growth. Notably, Buy Online Pickup in Store and Ship to Store facilities have been acting as key growth drivers. Apart from these, its newly launched mobile app and the Neighbor's Club loyalty program are performing well. In its last earnings call, management revealed plans to offer one-day delivery to 99% of its customers in the near term.

Moreover, it is progressing well with the expansion of its store base and the incorporation of technological advancements to induce traffic and drive the top line. The company’s sales and comps have been considerably gaining from the addition of new stores so far. Also, the rollout of capabilities like stockyard in-store kiosk and mobile point-of-sale (PoS) in all its stores, along with the enhancement of the Tractor Supply credit card offering and investments in its supply chain bodes well.

Further, the company remains on track with its ‘ONETractor’ strategy that is aimed at connecting store and online shopping. Backed by this initiative, it has been driving growth, building customer-centric engagement, offering suitable products and services, and reinforcing core infrastructure capabilities. Apart from these, Tractor Supply is on track to build upon its Out Here lifestyle strategy aimed at boosting space productivity, enhancing omnichannel initiatives, evolving the Neighbor’s Club loyalty program and augmenting in-store merchandising execution. Additionally, the company launched the Field Activity Support Team (“FAST”) and is implementing various technology and service enhancements in a bid to improve space productivity, introduce the latest merchandising strategies to life and accelerate efforts to remain relevant.

Such well-chalked efforts are likely to get reflected in the quarterly results. In its last earnings call, management anticipated net sales in the range of $2.6-$2.7 billion for the fourth quarter, with comps growth of 15-20%. Moreover, earnings per share are expected in the bracket of $1.37-$1.47, with gross margin projected in the range of flat to a marginal increase in the fourth quarter.

However, Tractor Supply continues to grapple with cost headwinds related to the COVID-19 situation. Notably, the company is expected to incur costs of $17-$20 million in the fourth quarter. Additionally, the Life Out Here Strategy is anticipated to have hurt the cost structure by an estimated $12-$15 million in the third quarter. Further, permanent wage and benefit changes are likely to result in costs of $13 million in the said quarter.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Tractor Supply this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tractor Supply has a Zacks Rank #3 and an Earnings ESP of +4.66%.

Other Stocks Poised to Beat Earnings Estimates

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

Tapestry TPR has an Earnings ESP of +4.53% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target Corporation TGT currently has an Earnings ESP of +2.51% and a Zacks Rank #2, at present.

Best Buy BBY currently has an Earnings ESP of +6.13% and a Zacks Rank #3.

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