Tractor Supply's (TSCO) growth durability and signs of margin rebound in 2026 create a more balanced risk/reward, Morgan Stanley said in a Thursday research report.

While normalizing comps and the company's trajectory away from peak margin pressure from its investment cycle might not result in a full-force return to 3% to 5% comps growth, topline drivers limit downside risks, according to the note.

The brokerage said it modeled a 1.9% comps growth for 2025, gross margin expansion of 25 basis points, and EPS of $2.10. For 2026 and 2027, it expects EPS of $2.30 and $2.58, respectively.

Comps growth could reach 3.3% in 2026 on fading headwinds related to commodity deflation, ticket growth benefits from tariff-linked price increases, healthy trends for consumable, usable and edible products, and transaction growth from robust customer engagement, analysts wrote.

Morgan Stanley said it expects a modest EBIT margin expansion of 10 bps in 2026. The company faces headwinds in H1 2026 due to the opening of two new distribution centers, but it is offset by the gross margin benefits from transportation savings in H2 2026.

The needs-based nature of CUE products supports sales stability and market share gains. With total customers and retention rates at record highs in Q3, the brokerage said it believes the value proposition is resonating and could drive algo growth over the next one to two years, according to the brokerage.

Morgan Stanley said it upgraded the stock to equalweight from underweight and raised its price target to $60 per share from $50.

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