We are downgrading Tractor Supply (TSCO) shares from Hold to Sell and lowering our target price from $36 to $25. While Tractor Supply’s business held up fairly well in 2008, it will have a more difficult go of it in 2009.

In our view, the consumer spending environment will worsen in 2009, as economic growth slows and unemployment rises. What’s more, the company will begin to go up against difficult comparisons in the second quarter of 2009.

All told, these factors will pressure Tractor Supply’s sales and margins, and we are reducing our 2009 earnings estimates from $2.66 to $2.53. While the market is assessing how much the company’s growth will slow, TSCO’s P/E multiple should contract to 10x. Tractor Supply should report fourth quarter results during the week of January 26.

Read the full analyst report on TSCO

“TSCO” Free Stock Analysis: Buy? Sell? Hold?
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