Piper Jaffray Downgrades Tractor Supply Company (TSCO) to Neutral Following Warning
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Piper Jaffray downgraded Tractor Supply Company (NASDAQ: TSCO) from Overweight to Neutral with a price target of $72.00 (from $103.00) following its negative pre-announcement.
Analyst Peter J. Keith commented, " While there are a number of headwinds impacting Q3 (weak oil/energy markets, weak agriculture economy markets, and weak demand for heating products), our over-arching concern is the emerging weakness in agriculture markets. Based on the work by Piper Jaffray’s Agriculture analyst, Brett Wong, we expect trends in these markets to deteriorate further into 2017. Furthermore, corn price deflation is now emerging as a potential headwind to comp in 2017. All in, we expect the comp in 2017 to look similar to 2016 at +1.5%, and we therefore believe TSCO shares warrant only a modestly premium valuation (at 20x 2017E EPS and 11x EBITDA). We continue to like the broader TSCO story for the long-term but see shares trading at a reduced valuation for the foreseeable future."
The firm cut FY 2016 EPS from $3.37 to $3.24 and FY 2017 EPS from $3.95 to $3.60.
Shares of Tractor Supply Company closed at $83.53 yesterday.
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