Tractor Supply (TSCO) Q2 Earnings Meet, Sales Beat Estimates

Tractor Supply Company TSCO has posted second-quarter 2022 results, wherein the top line surpassed the Zacks Consensus Estimate, while the bottom line came in line. Both metrics improved year over year.

Despite the inflationary pressure, results have gained from strength in the Life Out Here Strategy and healthy demand for its product categories. Consequently, management raised its 2022 view on the continued momentum in sales, cost-control measures and better inventory.

Despite the impressive results and the raised 2022 view, the PVH stock fell more than 2% in the pre-market trading session on Jul 21. However, shares of the company have lost 5.4% in the past three months but came ahead of the industry’s 16.9% decline.

Image Source: Zacks Investment Research

Q2 Details

Tractor Supply’s earnings of $3.53 per share improved 10.7% year over year, in line with the Zacks Consensus Estimate.

Net sales jumped 8.4% year over year to $3,903.4 million and beat the Zacks Consensus Estimate of $3,884 million. The improvement was driven by an increase of 5.5% in comps, led by growth of 7.5% in comparable average ticket, which offset a 2% decline in comparable average transaction count.

Also, a sturdy demand for everyday merchandise, including consumable, usable and edible products, as well as year-round products, contributed to comps growth.

The gross profit rose 7.7% year over year to $1,386.3 million, while the gross margin contracted 24 basis points (bps) to 35.5%. Pricing efforts and other initiatives to drive margins partly offset cost inflation, higher transportation costs and the unfavorable product mix.

Selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, contracted 19 bps to 22.1%. In dollar terms, SG&A expenses, including depreciation and amortization, rose 7.4% year over year. Normalized incentives, reduced COVID-19 response costs, and leverage in occupancy and other costs were partly offset by increased wage rates and investments in strategic efforts.

The operating income advanced 8.1% year over year to $525 million in the second quarter. Meanwhile, the operating margin contracted 4 bps to 13.5%.

Financial Position

Tractor Supply ended the second quarter with cash and cash equivalents of $530.8 million, long-term debt of $987.4 million, and total stockholders’ equity of $1,913.9 million.

In the six months ending Jun 25, 2022, the company incurred a capital expenditure of $265.3 million and generated a cash flow from operating activities of $625.6 million. Capital expenditure is expected to be $650-$70 million in 2022.

In the second quarter, Tractor Supply returned $290.8 million to its shareholders, including $188.2 million to repurchase 0.9 million shares and $102.6 million for quarterly cash dividends.

Store Update

In the quarter under review, the company opened 13 Tractor Supply stores. As of Jun 25, 2022, it operated 2,016 Tractor Supply stores across 49 states and 178 Petsense stores in 23 states.

Management remains on track with its store-opening initiatives. It plans to open 70-80 Tractor Supply stores and 10 Petsense stores in 2022.

Tractor Supply Company Price, Consensus and EPS Surprise

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

2022 Outlook

Driven by the solid quarterly results, the Zacks Rank #2 (Buy) company has raised its guidance for 2022. The company expects net sales of $13.95-$14.05 billion, up from the prior mentioned $13.6-$13.8 billion. Comps are likely to grow 5.2-5.8%, up from the earlier stated 3-4.5% growth.

The operating margin is anticipated to be 10.2% compared with the previously stated 10.1-10.3%. Net income is expected to be $1.07-$1.09, up from the previously communicated $1.04-$1.08 billion. Earnings per share are likely to be $9.48-$9.60, up from the earlier mentioned $9.20-$9.50. The view does not include the impacts of the Orscheln Farm acquisition as it is currently subjected to customary closing conditions.

Other Stocks to Consider

Here are three other top-ranked stocks to consider — Boot Barn Holdings BOOT, Kroger KR and Capri Holdings CPRI.

Boot Barn, which provides western and work-related footwear, apparel and accessories, currently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 25.2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 17% and 4.4%, respectively, from the year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Kroger, which provides an array of goods ranging from household essentials, groceries and electronics to toys and apparel for men, women and kids, currently carries a Zacks Rank #2. KR has a trailing four-quarter earnings surprise of 22.1%, on average.

The Zacks Consensus Estimate for Kroger’s current financial-year sales and EPS suggests growth of 3.2% and 4.1%, respectively, from the year-ago period’s reported figures. KR has an expected EPS growth rate of 9.9% for three-five years.

Capri Holdings, which provides women’s and men’s accessories, footwear and ready-to-wear, as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products, currently carries a Zacks Rank #2. CPRI has a trailing four-quarter earnings surprise of 49.3%, on average.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year sales suggests growth of 3.8% from the year-ago period’s reported figure, while the same for EPS indicates a decline of 4.9%. CPRI has an expected EPS growth rate of 11.3% for three-five years.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.