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May 30, 2020, 10:05 a.m. EDT

Tractor Supply benefitting from consumer trends like gardening and the move to rural communities, analysts say

Analysts are drawing comparisons between Tractor Supply’s forecast and what Lowe’s reported in its quarterly earnings

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By Tonya Garcia, MarketWatch


Tractor Supply Co.
Tractor Supply is forecasting better-than-expected sales and earnings, sending shares higher

Tractor Supply Co. is getting a major boost from its focus on the rural lifestyle, which has become more appealing to U.S. consumers during the coronavirus pandemic, analysts say.

Tractor Supply /zigman2/quotes/202009274/composite TSCO -0.07%   stock jumped 8% in Wednesday trading after the rural retailer pre-announced a blockbuster second quarter outlook, with sales growth of 24% to 29% expected, same-store sales growth of 20% to 25% forecast, and earnings per share outlook of $2.45 to $2.65.

The FactSet consensus is for sales of $2.85 billion, implying 21.1% growth, same-store sales growth of 19% and EPS of $2.32.

Tractor Supply also announced that it would be unveiling a revamped website and launching its first mobile app at the end of June.

And for employees, the company will extend the $2-per-hour bonus for frontline workers through June 27 with managers getting incremental $1,000 bonuses, put a permanent wage increase of at least $1 into effect starting June 28, and give salaried managers at various levels annual restricted stock units.

See: Lowe’s has identified 3 ares of focus for social distancing in its stores, including the garden area

A new package for part-time workers that includes medical and dental benefits will also be offered.

Raymond James quotes Mastercard Inc.’s /zigman2/quotes/207581792/composite MA -0.71%   Chief Executive Ajay Banga, saying “rural is the new urban.” Analysts say the retailers merchandise taps into current U.S. trends including gardening, spending time outside and minimizing expenses.

“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,” wrote analysts led by Matthew McClintock.

Raymond James rates Tractor Supply shares strong buy and moved their price target to $135 from $115.

And: TJX results show shoppers will head back to stores if the price is right, analysts say

“Tractor Supply was already a strong company with excellent fundamentals prior to the corona-crisis,” wrote Quo Vadis president John Zolidis. Quo Vadis rates Tractor Supply long.

“We believe it is reasonable to believe that secular shifts (less competition, more people moving to rural locations, superior economics in rural locations) together with new strategic initiatives (accelerated investment in digital) potentially reset Tractor Supply’s earnings power in a way not yet appreciated in consensus forecasts or the equity’s valuation.”

While some of the benefits working in Tractor Supply’s favor are temporary, like the stimulus checks consumers received, others are long-term positives.

“In general, rural economies and rural consumer psychologies have been less impacted by the corona-crisis than others,” Quo Vadis said. “We have heard this theme from several companies.”

/zigman2/quotes/202009274/composite
US : U.S.: Nasdaq
$ 138.15
-0.10 -0.07%
Volume: 840,746
Sept. 17, 2020 4:00p
P/E Ratio
23.66
Dividend Yield
1.16%
Market Cap
$16.07 billion
Rev. per Employee
$259,379
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/zigman2/quotes/207581792/composite
US : U.S.: NYSE
$ 339.43
-2.42 -0.71%
Volume: 3.71M
Sept. 17, 2020 4:00p
P/E Ratio
46.97
Dividend Yield
0.47%
Market Cap
$342.21 billion
Rev. per Employee
$1.01M
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