By Zacks Equity Research 

Tractor Supply Company (TSCO), a leading retail firm and ranch store brand, is scheduled to report its fourth-quarter 2011 financial results after the market closes on Feb. 1, 2012. The current Zacks Consensus Estimate for the quarter is 91 cents per share. For the quarter under review, revenue is expected to be $1,216 million, according to the Zacks Consensus Estimate.

Tractor Supply's third-quarter 2011 earnings came in at 58 cents, breezing past the Zacks Consensus Estimate of 52 cents, as well as the prior-year earnings of 40 cents per share.

Robust performance in core consumable, usable and edible products -- for instance, pet food and animal feed -- acted as a catalyst for an increase of 11.5% in same-store sales compared with a rise of 5.0% in the prior-year quarter. Tractor Supply has been witnessing increasing trends in same-store sales.

Tractor Supply suffered setbacks during the recession as buyers avoided big-ticket purchases, such as mowers, but recent quarters have seen an uptick in results. The company's impressive merchandising-improv​ement strategy and solid same-store sales trend resulted in double-digit top-line growth for the company.

Net sales in the quarter surged 17.9% to $977.8 million from $829.1 million in the prior-year quarter. Moreover, total revenue surpassed the Zacks Consensus Estimate of $934.0 million.

Tractor is well positioned to capitalize on positive long-term trends. Recently, the company provided a sneak preview of its fourth-quarter results, citing a robust sales performance during the quarter, and raised its fiscal 2011 profit forecast. Tractor Supply raised its earnings expectation for fiscal 2011 to between $2.97 and $2.99 per share from $2.85 to $2.89 per share.

The company indicated net sales during the fourth quarter surged 20.1% to $1.24 billion from $1.03 billion in the prior-year quarter. Further, Tractor Supply stated that an extra sales week in the quarter contributed approximately 6.6% to its sales growth.

The Zacks Consensus Estimate for fourth-quarter 2011 earnings of 91 cents per share is higher than the 67 cents delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between earnings of 82 cents and 95 cents a share.

For fiscal 2011, the Zacks Consensus Estimate stood at $2.99 per share, higher than its previous fiscal earnings of $2.25. The current Zacks estimate ranges between $2.97 and $3.00 per share.

For the fourth quarter of fiscal 2011, of the 21 analysts covering the stock, 13 analysts revised their estimates upward, while 1 revised in the downward direction in the last 30 days. For full fiscal 2011, 16 analysts revised their estimates in positive direction, while none revised in the opposite direction, in the last 30 days.

In the last seven days, no movement in estimates has been noticed in either direction for fourth-quarter 2011 or fiscal 2011.

With heavy positive effect from earnings revisions by analysts in the last 30 days, the Zacks Consensus Estimates for fourth-quarter 2011 has increased by 5 cents to 91 cents per share while for fiscal 2011 it increased by 8 cents to $2.99 per share.

With respect to earnings surprises, Tractor Supply has topped the Zacks Consensus Estimate over the last four quarters in the range of 2.5% to 50.0%. The average remained at positive 18.0%. This suggests that Tractor Supply has surpassed the Zacks Consensus Estimate by an average of 18.0% in the trailing four quarters.

Tractor Supply is the largest operator of farm and ranch stores in the U.S., a unique market niche that serves the lifestyle needs of recreational farmers and ranchers. The company's stores are strategically located in small towns, close to its target customers, which provide it with a competitive edge over its rivals.

We believe that Tractor Supply has successfully tweaked merchandise assortment across its stores, which is in line with the prolonged economic downturn. The company has increased the proportion of less discretionary items such as animal and pet-related products, while reducing shelf space for certain big-ticket merchandise such as outdoor power equipment.

Moreover, in an effort to boost margins, Tractor Supply is expanding its portfolio of private label brands and is also focusing on direct sourcing. The company has set a long-term target of generating 25% of sales from private label brands and 13% from strategic direct sourcing. This provides a strong upside potential to the company.

However, the company operates in a highly fragmented industry and faces intense competition from larger retailers, such as The Home Depot Inc. (HD) and Lowe’s Companies Inc. (LOW) as well as from independently-owned retail farm and ranch stores, privately-held regional farm store chains as well as cooperatives. Being in such a competitive industry, Tractor Supply may find it difficult to execute and implement new business strategies, which in turn may impact its operations adversely.

Tractor Supply's shares maintain a Zacks #1 Rank, which translates into a short-term "Strong Buy" recommendation. Our long-term recommendation on the stock remains "Neutral."

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