Tractor Supply Company Delivers A Bumper Crop Of Growth Tractor Supply Company (NASDAQ: TSCO) has been one of our favorite Underdog growth stories for the last 18 months or so. The company's new CEO embarke...

Tractor Supply Company Deserves Respect

Tractor Supply Company (NASDAQ: TSCO) has been one of our favorite Underdog growth stories for the last 18 months or so. The company's new CEO embarked on a revitalization strategy that refocused on the consumers and e-commerce, and the pandemic sparked trends that are proving to be sustainable and stronger-than-expected. Those two factors meshed like precision machinery and resulted in a sustained high level of growth. More importantly, the company appears to be navigating the inflationary environment and is delivering real value to shareholders.

"As the country reopens, the Out Here lifestyle remains incredibly relevant as we continue to grow our active customer count and retain last year's new and reengaged customers. We are increasing our earnings guidance given our strong results and the outlook for our customer trends and ongoing market share gains. The team is executing at a high level and advancing our Life Out Here Strategy while navigating the cost pressures we are experiencing. With a resilient business model, ongoing market share growth and strategic investments to transform the Company, we are excited about the significant opportunities ahead of us and remain committed to disciplined financial returns and sustained profitable growth."

Tractor Supply Company Plows Through The Consensus

Tractor Supply Company had in one fantastic second quarter. The company reported $3.60 billion in net consolidated revenue to set a company record. The revenue is up 13.2% from last year, beat the consensus by 350 basis points, and it is on top of a very difficult + 35% comp in last year's second quarter. Over the last two years, sales are up 41%, and the internal data is good as well.

Quarterly comps are up 10.5% on a 4.5% increase in tickets and a 6.5% increase in ticket average. The company reports strength in all categories pointing out every-day and seasonal items in the report. Notably, e-commerce sales experienced the fourth consecutive quarter of triple-digit gains. This is very significant as e-commerce Including same-day pick-up and delivery has become a large portion of the company's net revenue and we view these gains as very sticky.

Moving down the report, the company experienced a slight contraction in gross margins, less than 70 basis points, due to freight, the recently-launched Loyalty Club, And product mix shifts. Looking forward, the Loyalty Club expenses will dissipate soon and will ultimately drive higher sales over the long term so aren't a problem for us. The other two issues are noteworthy but do not yet present a concern. On the bottom line, the company's GAAP EPS of $3.19 beat the consensus by $0.24 is up about 1000 basis points from last year.

Tractor Supply Is Growing Growing Growing

Tractor Supply Company's revenue strength is due in part to the company's growth strategy. Tractor Supply opened a net of 25 new stores including 32 tractor supply companies and 3 new Petsense and there are still plans to open more stores this year. This helped lead management to raise guidance for revenue to a range of $12.10 billion to $12.30 billion versus the consensus of $11.64 billion, guidance that we see driving the stock higher over the next 6 to 12 months.

Price action is coming under a little bit of pressure and the early premarket action but this is due more to the general market conditions than to Tractor Supply Company's result or outlook. In our view, the post-earnings weakness is a buying opportunity for investors interested in a high-quality growth stock that pays A very safe and growing 1% dividend. Longer-term, we expect to see this stock retesting the recent highs near $200 fairly soon, and then breaking out to set new highs before the end of the year.

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