Key Takeaways From Home Depot's Fourth Quarter Earnings

GuruFocus.com
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- By Mayank Marwah

Home Depot (HD), the U.S. retailing company that sells tools, construction products and services, reported robust earnings and sales that surpassed estimates for the fourth quarter.

Home Depot's earnings and revenue were boosted due to the hurricane recovery efforts where customers in the southern parts of the U.S. and Puerto Rico spent more to replace home appliances. However, there were some Hurricane related expenses too.


By the numbers

Home Depot recorded fourth quarter adjusted earnings per share of $1.69, which was 8 cents more than what was forecasted. Revenue during the same period came in at $23.9 billion, up from $23.7 billion projected. Comparable store sales surged 7.5% year-over-year.

The company's net earnings for the quarter were $1.78 billion, or 1.52 per share, up from $1.7 billion, or $1.44 a share, reported in the year-ago quarter. Online sales soared 21% in the fourth quarter, and climbed 21.7% in the whole year. They comprosed 6.7% of the total sales.

Home Depot's CEO Carol Tome said, "Our ongoing commitment to enhance the interconnected retail experience for our customers, provide localized and innovative product, and deliver best-in-class productivity resulted in record sales and net earnings for 2017."

Customer traffic during the quarter increased 2% year-over-year while average check value spiked 5.5%. Owing to the changes in U.S. tax laws, the company had to incur a one-time tax charge of $127 million.

Guidance

As a result of a strong year, the company issued better guidance for fiscal 2018. Home Depot saw its revenue for this year surging 6.5%, and estimated comps growth of 5%.

"We expect higher job growth, higher income growth, and higher mortgage rates. But with that comes higher home price appreciation and rising housing demand, which should drive home improvement spending," Tome said.

The company provided an outlook for 2020 that its net sales may reach $120 billion.

Last word

Much of Home Depot's success depends upon demand from the housing market. The company projects demand from the housing sector to remain robust in this year as well.

The home improvement retailer is currently trying to expand its range of offering as is evident from the fact that the company has entered into a contract with Tesla's (TSLA) residential solar panels and Powerwall batteries at 800 Home Depot locations.

Disclosure: I do not hold any position in the stocks mentioned in this article.

This article first appeared on GuruFocus.


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