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Home Depot (HD) Tops on Q3 Earnings and Sales on Strong Demand

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·4 min read
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  • HD
  • TSCO
  • FAST

The Home Depot, Inc. HD has posted third-quarter fiscal 2021 results, wherein earnings and sales beat the Zacks Consensus Estimate and improved year over year. The company gained from the continued strong demand for home-improvement projects, robust housing market trends, and ongoing investments.

Shares of the leading home improvement retailer rose 1.2% in the pre-market session following the strong results. The Zacks Rank #2 (Buy) stock has risen 15.7% in the past three months compared with the industry's growth of 19.6%.

Home Depot's earnings of $3.92 per share improved 23.3% from $3.18 registered in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of $3.41.

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Zacks Investment Research

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Net sales advanced 9.8% to $36,820 million from $33,536 million in the year-ago quarter and beat the Zacks Consensus Estimate of $34,972.8 million. Sales benefited from the continued robust demand for home-improvement projects. The company is effectively adapting to the high-demand environment, driven by investments in its business and its associates' dedication to serving customers.

Its overall comps grew 6.1%, with a 5.5% improvement in the United States. In the reported quarter, comps were aided by a 12.9% rise in average ticket, driven by high-value purchases by home builders. This was partly offset by a 5.5% decline in customer transactions as the demand for DIY projects remained softer than the year-ago quarter due to the lapping of the high demand environment for home-improvement projects last year. Sales per square foot rose 6.2% in the reported quarter.

In dollar terms, the gross profit increased 9.7% to $12,563 million from $11,456 million in the year-ago quarter, primarily driven by robust sales growth. This was partly offset by higher cost of goods sold. Meanwhile, gross profit margin contracted 10 basis points (bps) to 34.1% from 34.2% in the year-ago quarter.

The operating income increased 19.4% to $5,795 million, while the operating margin expanded 120 bps to 15.7%. The operating margin benefited from top-line growth, offset by gross margin contraction as well as higher SG&A and other operating expenses.

The Home Depot, Inc. Price, Consensus and EPS Surprise

The Home Depot, Inc. Price, Consensus and EPS Surprise
The Home Depot, Inc. Price, Consensus and EPS Surprise

The Home Depot, Inc. price-consensus-eps-surprise-chart | The Home Depot, Inc. Quote

Balance Sheet and Cash Flow

Home Depot ended third-quarter fiscal 2021 with cash and cash equivalents of $5,067 million, long-term debt (excluding current maturities) of $36,712 million, and shareholders' equity of $1,035 million. In the first nine months of fiscal 2021, the company generated $13,386 million of net cash from operations.

In the first nine months of fiscal 2021, it paid out cash dividends of $5,264 million and repurchased shares worth $10,374 million.

3 Other Stocks to Consider

We have highlighted three other top-ranked stocks in the Retail - Wholesale sector, namely Tractor Supply Company TSCO, Lowe's Companies LOW and Fastenal FAST.

Tractor Supply Company, a rural lifestyle retailer in the United States, currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of TSCO have jumped 16.7% in the past three months. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tractor Supply Company's current financial year sales and earnings per share suggests growth of 19% and 23.9%, respectively, from the year-ago period's reported figures. TSCO has an expected EPS growth rate of 9.6% for three-five years.

Lowe's, the main competitor of Home Depot, currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 10.1%, on average. Shares of LOW have rallied 28.9% in the past three months.

The Zacks Consensus Estimate for Lowe's current financial year sales and earnings per share suggests growth of 4.4% and 28.9%, respectively, from the year-ago period. LOW has an expected EPS growth rate of 14.1% for three-five years.

Fastenal, a national wholesale distributor of industrial and construction supplies, currently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 2%, on average. Shares of FAST have risen 10.5% in the past three months.

The Zacks Consensus Estimate for Fastenal's current financial year sales and earnings per share suggests growth of 5.5% and 5.4%, respectively, from the year-ago period. FAST has an expected EPS growth rate of 9% for three-five years.


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The Home Depot, Inc. (HD) : Free Stock Analysis Report

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