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Tractor Supply: Early Disappoint Concerning

The narrow-moat company's focus on improved analytics is not matching the speed of changing weather patterns that the company is competing against.

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Tractor Supply Co
(TSCO)

Narrow-moat

For the first quarter, the company reported sales growth of 6.6% to $1.56 billion, tracking about 30 basis points behind the cadence implied in our model. Comparable-store sales contracted 2.2%, hindered by a comparable transaction count decline of 1.4% and average ticket decrease of 0.9% as mismatched weather patterns deflected sales of seasonal merchandise and deflation (which acts as a headwind to comps) affected overall performance. First-quarter earnings per share, now expected to be $0.45-$0.46, fell short of the consensus estimate of $0.53. Given that our full-year estimate (at $3.44) was at the low end of management’s guidance for $3.44-$3.52 and the first half of our model anticipated only modestly positive comp growth (1%-2%), we don’t expect to make a material change to our $80 fair value estimate, and we view the shares as undervalued.

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About the Author

Jaime M. Katz, CFA

Senior Equity Analyst
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Jaime M. Katz, CFA, is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She covers home improvement retailers and travel and leisure.

Before joining Morningstar in 2011, Katz was an associate for Credit Agricole Corporate and Investment Bank. She also worked in equity research for William Blair for three years and spent three years in asset management at Mesirow Financial.

Katz holds a bachelor’s degree in economics from the University of Wisconsin and a master’s degree in business administration from the University of Chicago Booth School of Business. She also holds the Chartered Financial Analyst® designation. She ranked first in the leisure goods and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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