Tractor Plows Ahead

By Gene G. Marcial

Weathering Storms
When Tractor Supply (TSCO ) was mentioned here on July 14, 2003 -- at a split-adjusted 23.65 a share -- some wondered if it was near its peak. Four months later the stock had leaped to 45, in part due to a sharp rise in farm income. But this year the farm-and-ranch outfitter -- with 500 stores in 30 states selling small tractors, animal food, and garden tools -- has slumped: It's down to 36.26. Although sales stayed strong, profit margins softened in the third quarter as fuel prices spiked and hurricanes interfered with deliveries.

"Such events offer a great buying opportunity for this usually high-flying stock," says Marion Schultheis, managing director at J&W Seligman, who has added to her firm's stake. She says Tractor has raised prices to offset its higher fuel, steel, and freight costs. Schultheis sees the stock hitting 50 in a year, based on her earnings estimates of $1.58 a share on sales of $1.7 billion in 2004, $1.96 on $1.9 billion in 2005, and $2.53 on $2.3 billion in 2006. Frank Brown of SunTrust Robinson Humphrey, which has done business with Tractor, rates it a buy. He says it "has the management and infrastructure" to grow bigger.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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