- Home Depot (NYSE: HD) EPS increased by 21% to $1.21 in Q1 2015 as compared to Q1 2014; after tax audit settlement, the company earned $ 1.16 per share beating analyst estimates of $ 1.15 per share
- Revenue increased 6.1% to $ 20.9 Bn relative to Q1 2014 and beat the analyst estimates of $20.8 Bn
- Company raised its fiscal 2015 guidance for revenue growth, comparable store sales and diluted EPS growth (from $5.14 initially to $5.25)
Cover image Copyright: niloo138/ 123RF Stock Photo
The Home Depot, Inc. is a home improvement retailer which sells a wide assortment of building materials, home improvement products and lawn and garden products. It is also provides a number of services. At the end of the first quarter, the Company operated a total of 2,270 retail stores in US, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, Canada and Mexico.
Home Depot Stock Performance
Source: Home Depot Annual report. "The graph assumes $100 invested at the closing price of the Company’s common stock on the New York Stock Exchange and each index on January 29, 2010 and assumes that all dividends were reinvested on the date paid. The points on the graph represent fiscal year-end amounts based on the last trading day in each fiscal year."
In first quarter earnings press release, Craig Menear, chairman, CEO and president said "We had a stronger than expected start to the year as we experienced a more normal spring across much of the country and continued recovery of the U.S. housing market,"
Home Depot Revenue Growth
Revenue in first quarter of fiscal 2015 grew 6.1% as compared to Q1 2014. The increase in revenue was attributable in part to favorable weather conditions, as well as recovering US housing market which lead to increase in demands from three major customer segments Home Depot caters to, viz.,
- Do-it-yourself customers: Typically home owners who purchase products online or from store and install on their own
- Do-it-for-me customers: Typically home owners who purchase products online or from store and hire someone to complete the installation
- Professional customers: Professional remodelers, contractors, repairmen, small business owners and tradesmen
Home Depot 2015 Guidance (Revised Upwards)
Seeing a strong Q1 2015 results, the company raised its fiscal 2015 guidance.
* Comparable store sales growth: These are also known as same store sales. Retail companies report these figures as they help assess what portion of sales growth is due to growth in sales from existing stores (open for more than one year). If a retail company is not doing well on comparable store sales front, then it might lead an investor to believe that company sales have reached a saturation point.
Home Depot Dividends & Share Repurchase Program
Home depot has been rewarding its shareholders with increasing dividends and intends to repurchase $ 3.4 bn in additional shares over the remainder of the fiscal 2015.
Home Depot Future Outlook
To enhance its supply chain capabilities and product offering in hardware, the company acquired HD Supply Hardware Solutions known as Crown Bolt, in January 2015. This should positively affect the income statement.
In the third quarter of fiscal 2014, the company confirmed breach of payment data systems. They incurred $ 7 million net breach related cost in Q1 2015 and since the investigation is still ongoing, the future cost cannot be estimated. This could negatively affect the financial results in the coming future. The company’s cash position, access to long term debt capital market and cash flow from operations should accommodate for the data breach cost, dividend payments, share repurchase, operating requirements and debt repayments if required.
The company’s revenue and operating costs can be affected by external factors like changes in foreign currency exchange, adverse weather conditions, stability of housing market, labor cost, unemployment rate, etc.
Home depot has historically outperformed S&P 500. The strong quarter results and company’s raised fiscal 2015 guidance boosts my confidence in the stock. Apart from glitches like data breach, the company’s stock price looks bullish in the long term, which can also be seen from declining short interest. Also Home depot has P/E ratio (ttm) of 23.0 which is less than P/E ratio (ttm) of 24.46 for its major competitor Lowe's Companies, Inc. (NYSE: LOW); this shows that Home depot still has upside potential.
Disclaimer: This is an independent article. I have long position in the stock. This document does not provide personal investment advice. Please consult financial advisor before making any investment decision.