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Tractor Supply Co. was upgraded to buy from neutral at Bank of America, with analysts looking forward to a springtime renewal for the retailer now that bad news is in the past.
Bank of America has a $120 price objective on Tractor Supply TSCO, -1.11% shares.
With trade tensions easing, limited disruption from the presidential election and a favorable housing market working in its favor, analysts led by Elizabeth Suzuki expect growth ahead.
“The company’s initiatives (Neighbor’s Club rewards program, private label credit card, OneTractor omnichannel) appear to be driving increased differentiation from its smaller regional competitors, and we see further opportunities for Tractor Supply to improve comps as these initiatives bear fruit,” the note said.
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Analysts also note the “inexpensive” price tag for shares, which closed Thursday down 1.3% at $93.83. Shares are down 1.8% in Friday trading.
Tractor Supply reported fourth-quarter earnings and sales that fell short of expectations. The company’s outgoing Chief Executive Greg Sandfort said warmer-than-expected weather took a toll.
Hal Lawton was named chief executive, effective Jan. 13.
“Despite top-line trends softening this quarter on transitory headwinds (weather, calendar shift, and last year’s hurricane), Tractor Supply was able to deliver margin outperformance via improving gross margin and SG&A rate,” wrote Raymond James analysts.
“Margin performance is critical to Tractor Supply’s story, given many investors have never believed in the company’s ability to deliver margin outperformance, and it just now happens to be occurring at the right moment to help offset the softer traffic trends that we expect to persist into 1Q20.”
Raymond James rates Tractor Supply shares strong buy with a $115 target price.
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JPMorgan isn’t as bullish.
“In our view, the stock reaction underappreciated the risk that Tractor Supply could end up remaining in the 2% to 3% comp trend range for an extended period due to consumer, energy market, and pet food trends,” analysts wrote.
Tractor Supply is guiding for fiscal 2020 comps of 1.5% to 3% growth.
JPMorgan maintained their neutral stock rating, but raised its price target to $104 from $100.
Wedbush analysts cut their price target to $105 from $115, but maintained their outperform stock rating.
Tractor Supply stock has gained nearly 8% over the past year while the S&P 500 index SPX, -1.56% is up 19.6% for the period.
