Tractor Supply Company (NASDAQ:TSCO) just released its third-quarter report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 7.6% to hit US$2.6b. Tractor Supply reported statutory earnings per share (EPS) US$1.62, which was a notable 18% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the 28 analysts covering Tractor Supply are now predicting revenues of US$10.4b in 2021. If met, this would reflect an okay 4.7% improvement in sales compared to the last 12 months. Statutory per-share earnings are expected to be US$6.49, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$10.1b and earnings per share (EPS) of US$6.33 in 2021. It looks like there’s been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$154, suggesting that the forecast performance does not have a long term impact on the company’s valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Tractor Supply, with the most bullish analyst valuing it at US$180 and the most bearish at US$109 per share. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It’s pretty clear that there is an expectation that Tractor Supply’s revenue growth will slow down substantially, with revenues next year expected to grow 4.7%, compared to a historical growth rate of 8.4% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.2% per year. Factoring in the forecast slowdown in growth, it seems obvious that Tractor Supply is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Tractor Supply’s earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates – from multiple Tractor Supply analysts – going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we’ve spotted 2 warning signs for Tractor Supply you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.