Last Update 06 Dec 25
Fair value Increased 0.35%TSCO: Expanded Outdoor Offerings Will Drive Future Earnings Upside
Narrative Update on Tractor Supply
Analysts have raised their fair value estimate for Tractor Supply modestly, from approximately 63.52 dollars to 63.74 dollars per share. They cite slightly higher expected profit margins and a marginally richer future earnings multiple, which more than offset a small trim to projected revenue growth and a higher discount rate.
What's in the News
- Cree LED filed a patent infringement lawsuit against Tractor Supply and Promier Products in the U.S. District Court for the Northern District of Illinois over several portable lighting patents, potentially exposing Tractor Supply to legal and financial risk (Key Developments).
- Tractor Supply launched an expanded lineup of exclusive Field and Stream hunting gear, pet products and outdoor lifestyle apparel in stores and online, supported by new brand marketing aimed at outdoor enthusiasts (Key Developments).
- The Field and Stream expansion includes a broader range of blinds, feeders, safes, trail cameras and a dedicated pet collection, including Pack Provisions foods and treats designed for active dogs (Key Developments).
- Between June 29 and September 27, 2025, Tractor Supply repurchased about 1.27 million shares for 75.9 million dollars, completing a long running buyback program totaling roughly 10.95% of shares outstanding since 2007 (Key Developments).
- Management raised full year 2025 guidance for net sales, comparable store sales and earnings per share and issued fourth quarter 2025 comparable sales guidance of 1% to 5% to reflect its view of current operating momentum (Key Developments).
Valuation Changes
- The Fair Value Estimate has risen slightly, from approximately 63.52 dollars to about 63.74 dollars per share, reflecting a modestly higher intrinsic valuation.
- The Discount Rate has increased slightly, from about 8.69% to roughly 8.83%, implying a marginally higher required return applied to future cash flows.
- The Revenue Growth forecast has edged down slightly, from around 7.21% to about 7.18%, indicating a minor tempering of top line expectations.
- The Net Profit Margin assumption has risen slightly, from roughly 7.63% to around 7.65%, suggesting a small improvement in anticipated profitability.
- The Future P/E multiple has increased slightly, from about 29.22x to approximately 29.38x, supporting a somewhat richer valuation on projected earnings.
Key Takeaways
- Diversifying the supply chain away from China may improve margins and earnings, mitigating tariff impacts.
- Strong demand and strategic initiatives like PetRx integration could drive customer engagement, boosting revenue and margins.
- Decline in store sales and economic uncertainties could pressure revenue and earnings, while tariffs and consumer caution may impact margins and big-ticket sales.
Catalysts
About Tractor Supply- Operates as a rural lifestyle retailer in the United States.
- Tractor Supply's strategy to reduce reliance on Chinese imports and diversify its supply chain, from over 90% to closer to 50% by year-end, could mitigate tariff impacts, potentially improving net margins and earnings.
- Strong transaction growth, unit growth in consumable, usable, and edible categories, and record customer retention indicate sustained demand, likely bolstering future revenue.
- Tractor Supply's success with strategic initiatives like their Chick Days and direct sales efforts, including PetRx integration, may enhance customer engagement and drive revenue and margin improvements.
- A potential shift from deflation to inflation in core categories like pet food and livestock feed, driven by factors like rising corn prices and new tariffs, could lead to higher average unit retail prices and impact gross margins positively.
- Continued triple-digit unit growth in consumable, usable, and edible product categories could bolster their market share, supporting higher revenue and potentially enhanced earnings.
Tractor Supply Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Tractor Supply's revenue will grow by 7.3% annually over the next 3 years.
- Analysts assume that profit margins will increase from 7.2% today to 7.6% in 3 years time.
- Analysts expect earnings to reach $1.4 billion (and earnings per share of $2.76) by about September 2028, up from $1.1 billion today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.2x on those 2028 earnings, up from 28.8x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.7x.
- Analysts expect the number of shares outstanding to decline by 0.79% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.58%, as per the Simply Wall St company report.
Tractor Supply Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The company experienced a decline in comparable store sales and average ticket, which could impact future revenue and earnings.
- Seasonal factors such as delayed spring weather have led to reduced sales in key categories, possibly affecting revenue projections.
- An uncertain macroeconomic environment, including discussions around a potential economic slowdown, might impact consumer spending and future earnings.
- Tariff costs pose a risk by increasing expenses for the company and its vendors, potentially squeezing margins and affecting net income.
- Pressure on big-ticket categories suggests a cautious consumer sentiment, which could lead to reduced revenue and earnings in these segments.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $62.593 for Tractor Supply based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $70.0, and the most bearish reporting a price target of just $47.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $18.7 billion, earnings will come to $1.4 billion, and it would be trading on a PE ratio of 29.2x, assuming you use a discount rate of 8.6%.
- Given the current share price of $59.08, the analyst price target of $62.59 is 5.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.