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Home Depot (HD) Earnings & Sales Surpass Estimates in Q1

The Home Depot, Inc. HD posted better-than-expected earnings for first-quarter fiscal 2019, retaining its beat streak for five years now. Also, the company’s top line outpaced the Zacks Consensus Estimate after a miss in the last reported quarter.

Quarterly results were fueled by underlying performance of the company’s core business. However, adverse weather in February and deflation in lumber prices hurt Home Depot’s comparable store sales (comps), which lagged analysts’ expectations. Nevertheless, management reiterated guidance for fiscal 2019.

Q1 Highlights

Adjusted earnings of $2.27 per share increased 9.1% from $2.08 registered in the year-ago quarter. The bottom line also exceeded the Zacks Consensus Estimate of $2.16.

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

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

Net sales grew 5.7% to $26,381 million from $24,947 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $26,298 million. While the company's overall comps increased 2.5%, in the United States comps grew 3%.

During the reported quarter, comps were aided by a 2% rise in average ticket and a 3.8% increase in customer transactions. Moreover, sales per square foot rose 5.6%.

In dollar terms, gross profit improved 4.6% to $9,017 million from $8,617 million in the year-ago quarter, primarily driven by higher sales. However, gross profit margin contracted 30 basis points (bps) to 34.2%.

Operating income increased 6.4% to $3,597 million, while operating margin was flat year over year at 13.6%.

Balance Sheet and Cash Flow

Home Depot ended the quarter with cash and cash equivalents of $1,882 million, long-term debt (excluding current maturities) of $26,804 million, and shareholders' deficit of $2,143 million. In first-quarter fiscal 2019, it generated $4,575 million of net cash from operations.

Further, the company paid cash dividends of $1,499 million and repurchased shares worth $1,368 million in the reported quarter.


Backed by solid growth strategies as well as present macroeconomic and housing backdrop, Home Depot reaffirmed its sales and earnings view for fiscal 2019, which have 52 weeks.

It expects sales growth of nearly 3.3%, with about a 5% increase in comps (for the comparable 52-week period). Additionally, the company anticipates earnings per share of $10.03 for fiscal 2019, up nearly 3.1% year over year.


Price Performance

In the past three months, shares of this Zacks Rank #4 (Sell) company have decreased 0.7% against the industry’s 0.3% growth.

Check These 3 Better-Ranked Retail Stocks

BMC Stock Holdings, Inc. BMCH delivered an average positive earnings surprise of 39.4% in the trailing four quarters. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Builders FirstSource, Inc. BLDR delivered an average positive earnings surprise of 17.9% in the last four quarters and carries a Zacks Rank #2 (Buy).

Abercrombie & Fitch Co. ANF has long-term earnings growth rate of 15.3% and a Zacks Rank #2.

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