Big Earnings Moves for these Flyover Stocks
Thoughts on Tractor Supply, Medpace, and a Fallen Angel Compounder
Hi everyone,
I’m not sure what it is - stretched valuations, the amount of capital sloshing around, etc. - but recent earnings results seem to produce bigger moves (up or down) than I can recall.
This week, a few Flyover Stocks had some big moves and I wanted to provide a quick take on each of them.
Tractor Supply - (-18% this week)
In my original profile of Tractor Supply, I wrote:
[A]nimal care staples…typically bring customers in the door. Over 50% of Tractor Supply’s revenue comes from animal care, much of it animal feed.
Animal feed is a difficult business. You need to have sufficient turnover to make it work, which is the pitfall that competitors typically face. If you don’t sell your food inventory quickly, you have two problems: your store smells like food and it attracts rodents. This creates a chicken-egg (pun intended) dilemma. You need food to sell, but if you don’t sell food quickly enough, you have problems.
Retail is tough and there’s little room for differentiation, but Tractor Supply’s key advantage versus the likes of Wal-Mart, Home Depot, etc. is its robust animal feed and care offerings.
Animal feed, in particular, is not amenable to e-commerce as it has a low value to weight ratio. It’s expensive to deliver to rural areas and no delivery person likes carrying 50 pound boxes to your door.
While Tractor supply noted no issues with livestock feed and care, the problem is with companion animal (e.g. dogs, cats) spending.
Here’s CEO Hal Lawton on the call:
“There was 96 million dogs in the market in 2023. That dropped down to about 94 million in 2024. And then I think most folks thought it would kind of stabilize around there. And then in 2025, you had a couple of million more dogs decline, going down to approximately 92 million.”
There are a number factors contributing to the decline in dog ownership, including:
Millennials as a cohort started families and entered their prime earnings years. In other words, they’re busier than ever.
The end of work from home. Dogs, in particular, require regular walks or at least outdoor access. Dog walkers/dog daycare is expensive.
The total cost of dog ownership has skyrocketed. A lot of local vets were rolled up by private equity in the 2020-2024 era, which has contributed to higher vet bills.
This is no small matter for Tractor Supply. Here’s Lawton again:
We're about 80% dog, 20% cat versus the market that's 60-40. We've always talked about -- our customers owns -- about 75% of our customers own a dog. Over 50% of our customers own a cat.
In other words, companion animals - and dogs, in particular - are key traffic drivers to Tractor Supply locations. The weakness in companion animal spending is showing up in Tractor Supply’s same-store-sales results, which were up just 0.5% this quarter.
While this is an important headwind for investors to consider, from a historical multiples perspective, Tractor Supply is worth a closer look today. This is particularly true if you believe the earnings slowdown is cyclical rather than secular.
Medpace - (-21% this week)
Todd Wenning is the founder of KNA Capital Management, LLC, an Ohio-registered investment advisor. KNA Capital Management manages a concentrated equity strategy and provides other investment-related services.
At the time of publication, the author, his immediate family, and/or KNA Capital Management, LLC or its clients own shares of Medpace and Chemed.
This profile is for informational purposes only and does not constitute personalized investment advice or a recommendation to buy or sell any security.
Please see important disclaimers.