Why HD Supply Holdings Stock Fell 18% This Morning

Leaking pipe

What happened

Shares of building-supplies distributor HD Supply Holdings (NASDAQ: HDS) are down 18% as of noon EDT Tuesday.

So what

HD Supply narrowly exceeded revenue estimates when it released first-quarter 2017 earnings this morning, reporting sales of $1.87 billion that edged out analyst expectations for $1.86 billion. The company's $0.42 per share in GAAP (generally accepted accounting principles) profits, on the other hand, appears to have fallen well short of analysts' projected profits of $0.66.

Compared to last year's Q1, sales were up 5%, and the profits -- although below expectations -- were much better than the $0.07-per-share loss that HD Supply reported in Q1 2016.

Now what

Guidance-wise, HD Supply management told investors to expect sales of about $1.34 billion in Q2 and "adjusted" net income of between $0.60 and $0.65 per share. HD Supply did not provide a GAAP number for its guidance, but the numbers it did provide appear to fall well short of Wall Street's expectations. According to data from Yahoo! Finance, analysts had been hoping that HD Supply would generate sales in excess of $2.1 billion this quarter, and profits of $1.05 per share.

In related news, HD Supply announced today that it will be selling its HD Supply Waterworks division, "the nation's largest distributor of water, sewer, storm and fire protection products," to private equity firm Clayton, Dubilier & Rice for $2.5 billion -- $500 million of which HD intends to spend on share buybacks. If and when President Trump's trillion-dollar infrastructure building program ever materializes, though, this means that HD Supply will largely miss out on the boom.

HD Supply hopes to close this sale in Q3.

10 stocks we like better than HD Supply Holdings

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and HD Supply Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 5, 2017

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.