Tractor Supply Shares Downgraded From Strong Buy To Market Perform

Tractor Supply Company (NASDAQ: TSCO) preannounced another quarter of declining comp sales. Apart from disappointing Q3 performance, the number of headwinds the company is facing “appears to be broadening,” Raymond James’ Dan Wewer said in a report. He downgraded the rating on Tractor Supply from Strong Buy to Market Perform, while removing the price target.

Q3 Miss

Tractor Supply preannounced its Q3 comp sales at -1 percent to flat, versus the 2.9 percent gain posted a year earlier. The preannouncement missed the Raymond James estimate of 3.0 percent and the consensus expectation of 3.3 percent. The company projected its Q3 EPS at $0.65-$0.67, higher than the $0.64 posted a year ago, but missing the Raymond James and consensus estimates of $0.72.

The Q3 decline would mean that Tractor Supply’s comp sales declined in three of the last four quarters, and translate to comp sales growth over the trailing four quarters of merely 0.4 percent, analyst Wewer noted.

Broadening Headwinds

Management has indicated a larger number of reasons for the weaker sales performance. With agricultural-based economies facing declining farm income for three consecutive years, demand across rural farming communities has been adversely impacted.

“This is a new headwind for Tractor and a bit troubling given during the past 15 years I have covered TSCO, management has said that the business was not overly-levered to farmers/ranchers,” Wewer wrote. He added, “Second, demand is weakened for heating products such as wood stoves and heating fuel. Finally, oil-sensitive markets continue to be a challenge for comp sales growth.”

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