Home Depot (HD) Q2 Earnings & Sales Top, Raises FY17 View – August 15, 2017


The Home Depot Inc. (HD Free Report) reported better-than-expected bottom-line results for second-quarter fiscal 2017, retaining the four-year long trend of beating earnings estimates. Further, sales topped estimates and grew year over year. This also marked the highest quarterly sales and earnings in the company’s history.

Additionally, the company raised its top and bottom-line guidance for fiscal 2017, based on the solid performance in the first half of fiscal 2017.

However, shares of this home improvement retailer saw a marginal decline of 0.2% in the pre-market trading session following the earnings release. Nevertheless, Home Depot’s shares have returned a solid 15% year to date, outperforming the industry’s gain of 11.5%.

The company posted fiscal second-quarter earnings of $2.25 per share, which escalated 14.2% from $1.97 in the year-ago quarter and beat the Zacks Consensus Estimate of $2.21.

Results gained from growth across the company’s interconnected platform as well as all regions. The company’s relentless focus on affording innovative products, boosting interconnected customer experience and driving productivity seems to be paying off. Further, the company continued to reap the benefits of a steady housing market recovery and strong customer demand.

Quarterly Details

Net sales grew 6.2% to $28,108 million from $26,472 million in the year-ago quarter. Moreover, the top line surpassed the Zacks Consensus Estimate of $$27,840.5 million. The company’s overall comparable-store sales (comps) increased 6.3%, while comps in the U.S. grew 6.6%.

Gross profit in the reported quarter improved 6% to $9,461 million from $8,927 million in the year-ago quarter, primarily driven by higher sales. Gross profit margin remained flat at 33.7%.

Improved gross profit led operating income to increase 8.8% to $4,463 million during the fiscal quarter. Further, operating margin expanded 40 bps from the year-ago quarter to 15.9%.

Balance Sheet and Cash Flow

Home Depot ended the fiscal second quarter with cash and cash equivalents of $4,830 million, long-term debt (excluding current maturities) of $24,422 million and shareholders’ equity of $3,554 million. In first-half fiscal 2017, the company generated $7,862 million of net cash from operations.

Fiscal 2017 Outlook

Following the robust fiscal first half performance, Home Depot raised earnings and sales guidance for fiscal 2017. The company now expects sales growth of nearly 5.3%, alongside a 5.5% increase in comps. Earlier, the company expected both net sales and comps for fiscal 2017 to increase 4.6%.

Moreover, management now anticipates earnings per share to increase about 13% to $7.29 in fiscal 2017, compared with the previous guidance of 11% growth to $7.15. The guidance includes $7 billion impact from share repurchases.

Zacks Rank

Currently, Home Depot carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the retail space are Lumber Liquidators Holdings Inc. (LL Free Report) , The Children’s Place Inc. (PLCE Free Report) and The Gap Inc. (GPS Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lumber Liquidators has gained a stupendous 131.6% year to date. Moreover, it has a long-term earnings growth rate of 27.5%.

Children’s Place, with a long-term earnings growth rate of 8%, has gained nearly 2.5% year to date.

Gap, with a long-term earnings growth rate of 8%, has gained nearly 2.9% year to date.

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