Tractor Supply Co.

Many analysts following Tractor Supply Co. showed confidence on Monday that Tractor Supply’s gains in 2021 are sustainable due to performance during the pandemic.

Analysts are encouraged that gains are sustainable partly because of their continued persistence into the second quarter, predicted to be the most difficult quarter. This comes on the heels of Tractor Supply releasing its earnings report and raising its outlook for the year

Analyst Scot Ciccarelli raised RBC Capital’s Tractor Supply price target to $211 from $177. Ciccarelli noted sales trends as “already impressive” before they gained momentum in first quarter 2021 and that, though they were buttressed by “temporary” boosts from inflation, weather and stimulus, core trends were still “extremely strong and consistent.”

DA Davidson’s Michael Baker pointed to its key metrics as a “big sales and profit beat” for the first quarter in a research note for investors, referring to new customer growth, repeat shopping rates, retention and loyalty car engagement. Baker increased Barclays’s price target to $190 from $160.

Other target price increases:

  • Loop Capital: to $190 from $150
  • Baclays: to $185 from $155
  • Morgan Stanley: to $190 from $170
  • Baird: to $210 from $200

Tractor Supply saw a 42% first-quarter uptick in net sales for 2020 as compared to 2019, jumping from $1.96 billion to $2.79 billion. Net income for the first quarter of 2021 went up 116.5% to $181.4 million from $83.8 million in that of 2020.

Tractor Supply opened 23 new locations and closed seven with two of the new opens and all seven of the closures being Petsense stores. The company is also currently pursuing acquisition of Orscheln Farm and Home’s Williamson County location.

The rise in comparable store sales yielded leverage in occupancy, among other costs, which proved meaningful to analysts because first-quarter costs by percentage of net sales were higher than in the previous year due to COVID-19 and incentive compensation necessitating investments in inordinate expenses for payroll, benefits and health and safety according to the Securities and Exchange Commission.

While increases in price targets augur well for Tractor Supply’s increased revenues, it is equally significant that they roughly match the price points at which Tractor is currently trading, suggesting analysts do not expect much more from Tractor Supply in the way of progress.

Tractor Supply opened and closed around $190 with negligible movement.

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