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Home Depot (HD) EPS, Revenue Beat Boosted By Strong Housing

Home Depot ()

Home Depot ()

The housing market has shown no signs of slowing down, and that’s a good thing for Home Depot (HD), which on Tuesday showed that the pervasive problems in the retail industry — a.k.a. death-by Amazon (AMZN) — are for other retailers to deal with.

Home Depot stock is rising in the premarket session Tuesday, up more than 1% after the largest retailer of home-improvement products extended its earnings beat streak to thirteen. The Atlanta-based company continues to grow where others have failed, reporting its highest quarterly revenue in the company’s history, while same-store sales were higher than Wall Street expected.

In the three months that ended July, Home Depot reported a net income of $2.67 billion, or $2.25 per share, compared with $2.4 billion, or $1.97 per share, in the same period a year ago, marking a 14% year-over-year rise in earnings per share. Second quarter revenue rose 6% year over year to $28.11 billion, above last year’s mark $26.47 billion and topping Street estimates of $27.82 billion.

The company continues to benefit from a combination of more consumers spending more money on home improvement projects while homebuilders are buying more material to build homes. Same-store sales, which tracks the performance of stores opened as least one year, were up 6.3%, above the 4.9% growth Wall Street was looking for. Notably, comparable sales at U.S. stores rose 6.6%, underscoring the lead Home Depot has over its competitors.

"We also achieved the highest quarterly net earnings in company history," CEO Craig Menear said in a statement. "These results were made possible by our hard working associates and the outstanding values brought forth by our supplier partners."

Despite increased competition from smaller competitor Lowe’s (LOW), Home Depot has been able to not only maintain its leadership position, but — in the process — create value for shareholders. The company has adopted a three-legged-stool approach, which applies a focus on consumer experience, product authority, and capital allocation. The result has been consistent organic revenue growth and expanding profit margins, which — in addition to boosting cash flows and lowering costs — has made the company “Amazon-proof.”

To that end, the company has also embraced an online strategy that has grown to become a $5 billion-plus business. And the fact that these initiatives, which include plans to ship products directly to consumers for its stores, has only achieved 6% penetration rate, suggesting there are tons of growth opportunities left.

Looking ahead, Home Depot expects fiscal 2017 revenue to rise more than 5%, while forecasting a 13% rise in earnings per share, reaching $7.29. This upbeat guidance, which is 5 cents above consensus estimates, comes on the heels of Home Depot in May boosting its 2017 per-share earnings growth forecast to 11%, to $7.15.

Home Depot stock has risen 15% year to date, but just 13% over the past year, compared with an 18% rise in the Dow Jones Industrial Average. Given this strong top- and bottom-line beat, combined with confident guidance, HD stock won’t underperform much longer.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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