Home Depot (HD) Surges on Q2 Earnings & Sales Beat, Ups View
The Home Depot, Inc. HD posted top- and bottom-line beat in second-quarter fiscal 2018. Notably, the company retained its five-year-long trend of beating earnings estimates. Moreover, sales reverted to a positive surprise trend after a miss in the last-reported quarter. With this, the company has delivered positive sales surprise in seven out of the last eight quarters.
Shares of this home-improvement retailer have rallied 2.2% in the pre-market session, following strong fiscal second-quarter results and an upbeat view for fiscal 2018. Further, this Zacks Rank #3 (Hold) stock has returned 29.3% in the past year, surpassing the industry’s growth of 28.8%.
The company posted fiscal second-quarter earnings of $3.05 per share, which escalated 35.6% from $2.25 recorded in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of $2.84.
The Home Depot, Inc. Price, Consensus and EPS Surprise
The Home Depot, Inc. Price, Consensus and EPS Surprise | The Home Depot, Inc. Quote
Results gained from a rebound in the seasonal business compared with the fiscal first quarter and the solid execution of its team of store associates, merchants, suppliers and supply chain. The company’s relentless focus on affording innovative products, boosting interconnected customer experience and driving productivity seems to be paying off. Further, it continued to reap the benefits of a steady housing-market recovery and strong customer demand.
Net sales grew 8.4% to $30,463 million from $28,108 million in the year-ago quarter and beat the Zacks Consensus Estimate of $29,981 million. The company's overall comparable-store sales (comps) increased 8% while comps in the United States grew 8.1%.
During the reported quarter, comps benefited from 5% rise in average ticket and 3.1% increase in customer transactions. Moreover, sales per square foot rose 8.6%.
Gross profit margin expanded 30 basis points (bps) to 34%. In dollar terms, gross profit improved 9.6% to $10,365 million from $9,461 million in the year-ago quarter, primarily driven by higher sales. Excluding the impact of the ASU No. 2014-09 revenue recognition standards adopted in first-quarter fiscal 2018, gross margin was 33.6%.
Operating income increased 9.8% to $4,901 million while operating margin expanded 20 bps from the year-ago quarter to 16.1%.
Balance Sheet and Cash Flow
Home Depot ended second-quarter fiscal 2018 with cash and cash equivalents of $3,490 million, long-term debt (excluding current maturities) of $23,295 million and shareholders' equity of $2,009 million. In the first half of fiscal 2018, the company generated $7,997 million of net cash from operations.
Backed by the solid performance in the first half of fiscal 2018, the company raised its earnings and sales forecast for fiscal 2018.
Home Depot now expects sales growth of nearly 7% for fiscal 2018, including the 53rd week, compared with the previous forecast of 6.7% growth. Comps growth is now estimated to be 5.3% versus the prior guidance of 5% increase. Further, the company anticipates earnings per share for fiscal 2018 to be up nearly 29.2% from $9.42 in fiscal 2017. It earlier projected earnings per share growth rate of 28%.
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Some better-ranked stocks in the same industry are GMS, Inc. GMS, with a Zacks Rank #1 (Strong Buy), Fastenal Company FAST and Tile Shop Holdings, Inc. TTS, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GMS has a long-term earnings growth rate of 7%. Moreover, the company’s estimates for the current fiscal have witnessed an uptrend in the last 30 days.
Fastenal, with long-term earnings growth rate of 14%, has gained 34.1% in the past year.
Tile Shop has a long-term earnings growth rate of 25%. Further, the stock has improved 18.5% in the past three months.
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