Have you been paying attention to shares of Tractor Supply (TSCO)? Shares have been on the move with the stock up 5.3% over the past month. The stock hit a new 52-week high of $114.25 in the previous session. Tractor Supply has gained 34.8% since the start of the year compared to the 21.1% move for the Zacks Retail-Wholesale sector and the 25.1% return for the Zacks Retail - Miscellaneous industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 25, 2019, Tractor Supply reported EPS of $0.63 versus consensus estimate of $0.56.
For the current fiscal year, Tractor Supply is expected to post earnings of $4.77 per share on $8.43 billion in revenues. This represents a 10.67% change in EPS on a 6.56% change in revenues. For the next fiscal year, the company is expected to earn $5.29 per share on $8.97 billion in revenues. This represents a year-over-year change of 10.96% and 6.38%, respectively.
Tractor Supply may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Tractor Supply has a Value Score of C. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 23.6X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 19.2X versus its peer group's average of 6X. Additionally, the stock has a PEG ratio of 2.08. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Tractor Supply currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Tractor Supply passes the test. Thus, it seems as though Tractor Supply shares could still be poised for more gains ahead.
How Does Tractor Supply Stack Up to the Competition?
Shares of Tractor Supply have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Hibbett Sports (HIBB), Tractor Supply (TSCO), and AutoZone (AZO), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 40% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Tractor Supply, even beyond its own solid fundamental situation.
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