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Will Dark Clouds Marr Tractor Supply's (TSCO) Q2 Earnings?

Farm and ranch store retailer, Tractor Supply Company TSCO is scheduled to report second-quarter 2017 results on Jul 26, after the market closes. Last quarter, the company posted earnings in line with the Zacks Consensus Estimate.

Notably, the company has delivered positive earnings surprise in two of the trailing four quarters, recording an average earnings beat of 0.9%.

Tractor Supply Company Price and EPS Surprise


Tractor Supply Company Price and EPS Surprise | Tractor Supply Company Quote

What to Expect?

The question lingering in investors’ minds now is whether Tractor Supply will be able to post positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is $1.28, reflecting a year-over-year increase of 10.2%. We note that the Zacks Consensus Estimate has been stable ahead of the earnings release. Analysts polled by Zacks expect revenues of $2.03 billion, up 9.4% from the year-ago quarter.

However, we note that the stock has underperformed both the Zacks categorized Retail – Miscellaneous industry and the Retail-Wholesale sector in the last three months. The company’s shares have declined 20.2%, while the Zacks categorized industry has dipped 10.8%. Meanwhile, the sector has witnessed growth of 5.6%.

Factors at Play

Tractor Supply has been struggling for quite some time now due to challenging economic backdrop at the agricultural and energy sectors. This has been taking a toll on consumer spending and been weighing on its top-line performance.

While the company’s revenues came marginally ahead of estimate in first-quarter 2017, comps declined due to a fall in comparable transaction count and average ticket. Further, comps were hurt by soft seasonal merchandise sales, along with deflationary pressure. Moreover, its margins continue to be under pressure due to increased markdowns, higher promotional activities as well as due to rise in freight expense for consumable, usable and edible (C.U.E.) products.

Nevertheless, the company remains hopeful of the spring selling season, wherein it anticipates seasonal merchandise sales to witness some improvement. Further, its upcoming merchandise strategies and constant implementation of cross-network consumer-centric growth plans reflect its spring season prospects. Also, the company's focus on enhancement of IT systems and supply chain bode well.

While the company’s growth prospects and optimism for the spring season are noteworthy, we cannot ignore the current trends in the agricultural sector and its dependence on seasons. So, let’s see if Tractor Supply’s initiatives can help it tide over the current trends.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Tractor Supply is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Tractor Supply has an Earnings ESP of -2.34% as the Most Accurate estimate of $1.25 is lower than the Zacks Consensus Estimate of $1.28. Further, the company has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

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

McDonald's Corporation MCD currently has an Earnings ESP of +1.23% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here., Inc. AMZN has an Earnings ESP of +13.77% and a Zacks Rank #3.

Whole Foods Market Inc. WFM currently has an Earnings ESP of +2.94% and a Zacks Rank #3.

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