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Home Depot Beats Revenue and Earnings Estimates on Housing Market Strength

$2.48 billion profit in Q4 on revenue of $25.78 billion.

Home Depot Inc reported revenue and earnings Tuesday that beat analyst estimates, boosted by a strong housing market and demand during the holiday season.

Shares of the home improvement chain, considered a barometer for the economic health of U.S. households, were up 3.1% to $247.00 as of 9:10am ET in premarket trading.

The U.S. housing market has benefited from the lowest mortgage rates in more than three years after the Federal Reserve lowered borrowing costs thrice in 2019.

Sales of existing homes, which make up about 90% of U.S. home sales, surged 9.6% on a year-on-year basis in January, the National Association of Realtors said on Friday.

The sales, however, declined on a seasonally adjusted annual rate last month, due to a dearth of houses on the market, though the supply squeeze is likely to ease with building permits and under-construction houses at levels last seen nearly 13 years ago.

Fourth Quarter

Comparable sales at Home Depot for the fourth quarter of 2019 increased 5.2 percent.

Same-store sales rose 5.2% in the fourth quarter ended Feb. 2, above expectations of a 4.8% increase, according to IBES data from Refinitiv.

Net sales fell 2.7% to $25.78 billion, but beat analysts’ average expectation of $25.76 billion.

Net earnings rose to $2.48 billion, or $2.28 per share, from $2.34 billion, or $2.09 per share a year earlier. Analysts were expecting earnings of $2.10 per share.

Full Year 2019

Comparable sales for 2019 increased 3.5 percent.

Sales were $110.2 billion, compared to $108.2 billion in 2018.

Net earnings $11.2 billion, or $10.25 per diluted share, compared to $11.1 billion, or $9.73 per diluted share in 2018.

Fiscal 2019 was a record year for our business and one marked by significant progress as we invest to transform ourselves into The Home Depot of the future. We had a strong finish to the year as our fourth quarter results reflect strength in our core business, solid execution around our holiday events and the overall health of the consumer. We are now two years into our multi-year investment program and have more conviction than ever that our strategic initiatives are creating a value proposition that is unique to the marketplace and will extend our leadership position for years to come. Through the second year of our One Home Depot investment program, we have grown sales by over $9 billion dollars – a level of growth unmatched in our market.

– Craig Menear, chairman, CEO and president, Home Depot.

Dividend Increase

The board of directors had approved a 10 percent increase in its quarterly dividend to $1.50 per share. The increase marks the eleventh consecutive year of dividend growth by Home Depot.

Guidance for 2020

The company also provided the following guidance for this year:

  • Total sales growth of approximately 3.5 percent to 4.0 percent
  • Comparable sales growth of approximately 3.5 percent to 4.0 percent
  • Six new stores
  • Operating margin of approximately 14.0 percent
  • Net interest expense of approximately $1.2 billion
  • Effective tax rate assumption of approximately 24.0 percent
  • Share repurchases of at least $5.0 billion
  • Diluted earnings-per-share growth of approximately 2.0 percent to $10.45
  • Capital spending of approximately $2.8 billion
  • Depreciation and amortization expense of approximately $2.4 billion
  • Cash flow from operations of approximately $13.5 billion

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Sources: Equities News, Reuters, Home Depot