Tractor Supply formed a three-week-tight pattern as the stock holds near highs following a strong Q4 and positive full-year guidance. The retail stock is Thursday's IBD 50 Stocks To Watch pick.
Tractor Supply sells agriculture, lawn and garden maintenance, and livestock products, plus care products for horses and pets. The Brentwood, Tenn., company has over 2,000 stores in 49 states, and over 170 Petsense pet supplies stores in 23 states.
Tractor Supply acquired 81 Orscheln Farm and Home stores in October. The stores will be rebranded to Tractor Supply by the end of 2023. Orscheln sells farming, automotive, outdoor, hunting and fishing and livestock products.
Tractor Supply plans to open approximately 70 Tractor Supply stores and 10 to 15 Petsense stores this year.
Tractor Supply holds the No. 3 spot out of 12 stocks in the retail and wholesale building products group, which is an odd placement for the retailer. The group is ranked 78th out of 197.
Farm Retail Stock Sees New Buy Point
The retail stock formed a three-weeks-tight pattern and is near a 236.23 buy point. A three-weeks-tight pattern forms when a stock closes within 1.5% of the prior week's close for two straight weeks. It is considered a bullish formation following a base breakout.
The new pattern emerged after Tractor Supply broke out of a double-bottom base with 227.84 buy point.
Shares rose 6% in heavy volume after it reported Q4 results Jan. 26. Shares remain in the 5% buy zone of the double-bottom base, which reaches to 239.23, according to MarketSmith pattern recognition.
TSCO reclaimed its 21-day exponential moving average this week, and has consistently hugged the 10-week moving average. Shares are 3% off their 52-week high.
Fourth Quarter EPS Posts Strong Growth
Fourth-quarter EPS growth accelerated to 26%. Earnings rose a much slower 6% to 11% the previous three quarters. Quarterly sales growth improved to 21%, following three straight quarters of 8% increases.
Q4 comparable-store sales rose 8.6%, which lagged the prior year's Q4 12.7% increase.
"With a solid foundation, we plan to build on our momentum in 2023. We believe we have the right strategies to manage through the near term and to deliver long-term compounding growth and value creation," said Hal Lawton, Tractor Supply's CEO.
Tractor Supply repurchased about 3.4 million shares of its common stock for $700.1 million in 2022.
Analysts forecast 8% EPS growth in 2023 and 10% in 2024.
Retail Stock Makes Wall Street Journal's Top 250 List
Mutual funds own 47% of its shares, with 2,056 holding the retail stock in December. That's up from 2,039 in September, showing institutional interest in the stock.
TSCO had the second highest increase in social responsibility, as ranked in the Wall Street Journal 2022 Management Top 250 list.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
