Evercore ISI Downgrades Tractor Supply Company (TSCO) to In Line

Evercore ISI analyst Oliver Wintermantel downgraded Tractor Supply Company (NASDAQ: TSCO) from Outperform to In Line with a price target of $300.00.

The analyst comments "We are downgrading Tractor Supply to In Line from Outperform. We continue to secularly like the rural lifestyle market and believe Tractor’s management has plenty of opportunities to take margins past 10% over the next few years. That said, the stock is close to our $300 Base case and the risk/reward is less attractive at current valuations. Five-year comps are up 54%, better than any other retailer in our coverage, except for AMZN (fig 10). The market took notice and drove the stock ~40% higher ytd (multiple driven, EPS estimates are unchanged since the beginning of the year; fig 11), stretching valuation: EV/EBITDA at 17.6x is close to the 10-year high of 18x. Forward P/E of 26.5x and the 25% premium to the market are also at the upper end (figures 7 to 9). We have margins down in 2H24 as transportation tailwinds are fading and mix is becoming less beneficial in 4Q. The street has comps up 3% in ‘25, while our estimate is 100bps lower. On an annual basis, TSCO’s comps didn’t go negative post pandemic, and therefore we think the rebound won’t be a V-shaped recovery. In addition, we believe TSCO won’t benefit as much as other retailers from lower rates. Despite that, TSCO is trading at an all-time high and valuation reached the upper end of historic ranges. Rate cuts should be a positive for TSCO, but we prefer HD, SHW and W that we believe benefit more from the reduction of rates and the following acceleration of existing home sales. 26.7x our 2025 EPS of $11.25 (in line with consensus) gets us to our (unchanged) Base Case of $300, with little upside, which doesn’t justify an Outperform rating, in our view. We wouldn’t hesitate to get more constructive again if transactions accelerate and we see declining headwinds from commodity deflation."

For an analyst ratings summary and ratings history on Tractor Supply Company click here. For more ratings news on Tractor Supply Company click here.

Shares of Tractor Supply Company closed at $298.07 yesterday.

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