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Tractor Supply (TSCO) to Post Q3 Earnings: What's In Store?

Tractor Supply Company TSCO is slated to report third-quarter 2020 results on Oct 22, before the opening bell. In the last reported quarter, the company reported an earnings beat of 10.7%. Moreover, it delivered an earnings surprise of 2.6%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.35, suggesting an increase of 29.8% from the year-ago period’s reported figure. Notably, the consensus mark has been raised by 2 cents in the past seven days. For third-quarter revenues, the consensus mark is pegged at $2.39 billion, suggesting 20.3% growth from the prior-year quarter’s reported figure.

Factors To Note

Tractor Supply has been gaining from sturdy customer demand for essentials since the onset of the pandemic. To meet this growing demand, the company recruited more than 5,000 employees for full-time and part-time positions across its stores and distribution centers. Also, solid omni-channel capabilities, including curbside pickup, same day/next day delivery, first-ever mobile app, stockyard in-store kiosk, mobile point-of-sale (PoS) in all stores and improved credit card offering, have been aiding the company. Apart from these, management has been on track to build up on Tractor Supply’s Out Here lifestyle assortment and convenient shopping format in a bid to provide even better shopping experience

Moreover, the company has been undertaking several growth initiatives, which include the expansion of the store base, and incorporation of technological advancements to induce traffic and drive the top line. The addition of stores has been contributing to sales and comps significantly every quarter. Also, enhanced marketing and merchandising initiatives as well as supply chain efficiencies are likely to have driven comps in the third quarter.

Further, the company has been focused on the ‘ONE Tractor’ strategy that is aimed at connecting stores and online shopping. Backed by this initiative, it has been driving growth, building customer-centric engagement, offering suitable products and services, and reinforcing core infrastructure capabilities.

Gains from these plans are expected to get reflected in the quarter under review’s results. In its last reported quarter’s earnings call, management anticipated net sales of $2.30-$2.40 billion for the third quarter, with comps growth of 12-18%. Moreover, earnings per share areexpectedto be $1.15-$1.35.

However, continued uncertainty and cost headwinds related to the COVID-19 situation have been concerning. Notably, the company is expected to incur costs of $20 million in the third quarter. Additionally, the aforementioned growth initiatives are anticipated to have hurt the cost structure by an estimated $15 million in the third quarter. Moving on, permanent wage and benefit changes are likely to result in costs of $13 million in the said quarter.

Tractor Supply Company Price and EPS Surprise

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Tractor Supply this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tractor Supply has a Zacks Rank #3 and an Earnings ESP of +5.30%, which make us confident of a beat.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat.

Target Corporation TGT currently has an Earnings ESP of +24.76% and it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tapestry TPR has an Earnings ESP of +4.05% and a Zacks Rank #2, at present.

Lowe’s Companies LOW currently has an Earnings ESP of +0.20% and a Zacks Rank #2.

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