Sales, Earnings Rise at Home Depot, So Does Forecast (HD)

The Home Depot Inc. (NYSE: HD) reported second-quarter earnings per share (EPS) of $1.01 and $20.57 billion in revenues before markets opened this morning. In the same period a year ago, the home improvement store reported EPS of $0.86 on revenue of $20.23 billion. Second-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.97 and $20.74 billion in revenue.

Home Depot also revised its sales forecast for the full fiscal year, raising its estimate to an increase of 4.6% over last year’s revenue total of $70.5 billion to about $73.7 billion. The current consensus estimate calls for yearly sales of $73.97 billion.

The company also raised its full-year EPS estimate to $2.95, above the current consensus estimate of $2.92. The EPS guidance includes the effect of Home Depot’s share repurchases so far this year and another planned $1.4 billion in buybacks.

The company’s chairman and CEO said:

As expected, second-quarter sales reflected the pull forward of seasonal activity into the first quarter. But we saw continued demand for core products and delivered second-quarter earnings above our expectations.

U.S. same-store sales for the quarter rose 2.6% year-over-year, and the rise for all stores was 2.1%.

The impact of early sales in the first quarter due to warm weather was anticipated, but what Home Depot may not have expected is the increase in home buying, especially the uptick in new home sales. Of course as home prices rise that buying activity may cool off. That may be what is leading Home Depot to be cautious on its full-year revenue estimate.

The company has repurchased $2.63 billion in stock for the first six months of the year. Added to the $1.4 billion it expects to spend in the second half of the year, that totals $4.03 billion. Home Depot’s revenue forecast is light by just $270 million to the current consensus estimate, and the share buybacks have boosted the full-year EPS guidance to above the current estimate. Most investors would accept that as a pretty good trade-off.

Shares are up about 2.5% in premarket trading, at $54.15. The current 52-week range is $29.79 to $54.28. Thomson Reuters had a consensus analyst price target of $54.65 before today’s results were announced.

Paul Ausick