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HD Supply (HDS) to Report Q3 Earnings: What's in the Offing?

HD Supply Holdings, Inc. HDS is scheduled to release third-quarter fiscal 2018 (ended October 2018) results on Dec 4, before the market opens.

This industrial services provider delivered better-than-expected results in the last four quarters, the average positive earnings surprise being 8.07%. Notably, the company’s earnings of 99 cents surpassed the Zacks Consensus Estimate of 96 cents by 3.13% in the second quarter of fiscal 2018 (ended July 2018).

In the past month, the company’s shares have gained 4.6% versus 5.3% increase recorded by the industry it belongs to.

Let us see how things are shaping up for HD Supply this quarter.

Factors to Affect Q3 Results

We believe that rise in industrial activities in the United States, better housing market conditions, increased spending on infrastructural developments and an improving job market should support growth of industrial service providers like HD Supply.

For the third quarter of fiscal 2018, HD Supply anticipates net sales of $1,560-$1,610 million, reflecting an increase of 14-18% from the year-ago tally. Organic sales growth is predicted to be roughly 8%. Adjusted earnings are predicted to be between 95 cents and $1.00 per share. The bottom line guidance reflects year-over-year growth of 19-25%.

On a segmental basis, the company’s Facilities Maintenance segment is poised to gain from investments made to enhance the selling channels. Further, growth in the “Living Space” MRO end market should have supported growth in the fiscal third quarter. It’s worth mentioning here that the company anticipates 1-2% growth in the “Living Space” MRO market in fiscal 2018 (ending January 2019).

The Construction & Industrial segment will benefit from healthy construction activities in both residential and non-residential end markets. Also, the segment will gain from the A.H. Harris buyout as it strongly compliments the existing White Cap business. For fiscal 2018, the company anticipates mid-single-digit growth in the residential construction market and low- to mid-single-digit growth in the non-residential market.

Beside these positive aspects, HD Supply is vulnerable to adverse impacts from rising freight costs and spur in labor charges. Further, ill impacts of tariffs, especially on rebars, remain an issue.

Earnings Whispers

Our proven model provides some idea about the stocks that are about to release their earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with HD Supply has been provided below.

Earnings ESP: HD Supply has an Earnings ESP of 0%, as the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 98 cents.

HD Supply Holdings, Inc. Price, Consensus and EPS Surprise

HD Supply Holdings, Inc. Price, Consensus and EPS Surprise | HD Supply Holdings, Inc. Quote

Zacks Rank: HD Supply currently carries a Zacks Rank #2.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some other companies in the Zacks Industrial Products sector that you may want to consider as they have the right combination of elements to post an earnings beat this quarter, according to our model.

Applied Industrial Technologies, Inc. AIT has an Earnings ESP of +0.16% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

W.W. Grainger, Inc. GWW has an Earnings ESP of +0.63% and a Zacks Rank #3.

Brady Corporation BRC has an Earnings ESP of +0.32% and a Zacks Rank #3.

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