Story updated at 9:40 a.m. to reflect market activity.
Tractor Supply fell 1.6% to $65.13.
The firm lowered its price target for the retailer to $70 from $80.
Analyst Brian Nagel wrote, "Fundamentally, TSCO represents one of the strongest operators in Hardlines, in our view. Longer-term prospects for the chain remain quite compelling. In the near term, we are concerned that the combination of limited EPS upside potential and a still elevated multiple will dissuade increasingly discerning Retail stock investors and keep a lid on outperformance potential for TSCO."
Despite the downgrade, Nagel wrote that 2014 if the year that Tractor Supply "grows into its multiple."
Separately, TheStreet Ratings team rates TRACTOR SUPPLY CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TRACTOR SUPPLY CO (TSCO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, good cash flow from operations, solid stock price performance and compelling growth in net income. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TSCO's revenue growth has slightly outpaced the industry average of 7.0%. Since the same quarter one year prior, revenues rose by 10.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TRACTOR SUPPLY CO has improved earnings per share by 22.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TRACTOR SUPPLY CO increased its bottom line by earning $2.33 versus $1.90 in the prior year. This year, the market expects an improvement in earnings ($2.62 versus $2.33).
- Net operating cash flow has slightly increased to $235.07 million or 5.66% when compared to the same quarter last year. In addition, TRACTOR SUPPLY CO has also modestly surpassed the industry average cash flow growth rate of 0.61%.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 20.6% when compared to the same quarter one year prior, going from $79.49 million to $95.88 million.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 26.42% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: TSCO Ratings Report