IBD Stock Analysis
- Clears 113.99 handle buy point from 10-month consolidation
- Relative strength line hits record high
- Earnings growth best in five quarters, Q2 guidance strong
Industry Group Ranking
* Not real-time data. All data shown was captured at
1:01PM EDT on
Tractor Supply (TSCO) is the IBD Stock Of The Day as the farm supply retailer broke out powerfully after announcing strong first-quarter earnings and a bullish second-quarter outlook late Tuesday.
Tractor Supply is based in Brentwood, Tenn., and operates more than 2,000 retail stores in 49 states. It doesn’t just sell farming equipment; it also offers pet supplies, power tools and lawn and garden supplies. Many of its customers are “hobby farmers” rather than full-blown agricultural operations.
Late Tuesday, the retailer reported that first-quarter earnings rose 13% to 71 cents a share, the best year-over-year gain in five quarters. Revenue grew 8% to $1.9592 billion, the best advance in four quarters. Analysts expected Tractor Supply earnings of 70 cents on sales of $1.96 billion.
But the big news was second-quarter guidance. Tractor Supply said it sees “record-breaking sales and earnings” and comparable-store sales growth of 20% to 25% as it remains an essential business during the coronavirus pandemic. It sees diluted earnings of $2.45 to $2.65 per share. That would be a 42% EPS gain at the midpoint. Analysts had expected Tractor Supply earnings of $1.77, down 2%.
“Our outlook for record-breaking sales and earnings in the second quarter demonstrates the potential for Tractor Supply to emerge stronger than before as we continue to gain market share and build our business for the future,” CEO Hal Lawton said in a release.
Analysts are bullish on rural suppliers like Tractor Supply continuing to see a boost in sales amid the Covid-19 pandemic.
“We believe rural markets are and will continue to reap the benefits of consumers moving/vacationing away from their more urban counterparts, which ideally fits the rural nature of Tractor Supply’s store base,” Raymond James analyst Matthew McClintock wrote in a note Wednesday.
Raymond James has a buy rating on Tractor Supply and raised its price target on the stock to 135 from 115.
Tractor Supply Stock Technical Analysis
Shares climbed 7.7% to 119.76 on the stock market today, hitting a record high. Tractor Supply stock broke above a 113.99 buy point from a handle in a 10-month consolidation. TSCO stock is just above the 5% chase zone, which ends at 119.69.
The deep base isn’t that eye-pleasing, with Tractor Supply stock racing straight from the bottom. But the relative strength line, which tracks Tractor Supply stock vs. the S&P 500 index, is at a record high.
The RS line is the blue line in the chart below..
Tractor Supply stock has a 93 IBD Composite Rating out of a best-possible 99, according to the IBD Stock Checkup tool, and an 89 EPS Rating.
Home Depot, Lowe’s At Buy Points
Home-improvement chains Home Depot (HD) and Lowe’s (LOW) are quasi-rivals to Tractor Supply.
Home Depot stock rose 2% to 247.36. While HD stock already cleared a 224.32 cup-with-handle buy point — only a daily chart. Investors could treat 248.42 as a legitimate entry.
Lowe’s stock rallied 3.6% to 128.01. LOW stock topped a 126.83 entry.
Stock Market Trends Positive
The stock market is in a confirmed uptrend and remains solid after nearly hitting lows on March 23, according to IBD’s The Big Picture. The major stock indexes confirmed a new uptrend on April 2.
With hot tech and medical growth stocks struggling somewhat this week, there’s been a rotation into “real world” stocks. Tractor Supply, with solid earnings and strong guidance, could benefit from that trend.
Follow Gillian Rich on Twitter @IBD_GRich for investing news and more.
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