Home Depot Earnings Diminished by Potential Impact of Data Breach

Retail

Published: November 18, 2014 7:35 am

Last Updated: April 27, 2020 11:02 pm

Home Depot Inc. (NYSE: HD) reported third-quarter 2014 results before markets opened Tuesday. The home improvement retailer posted diluted earnings per share (EPS) of $1.15 and $20.52 billion in revenues. In the same period a year ago, the home improvement store reported EPS of $0.95 on revenue of $19.47 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.13 and $20.47 billion in revenue.

Third-quarter same-store sales at all Home Depot locations rose 5.2% year-over-year and 5.8% in the United States.

The company reaffirmed 2014 guidance for sales growth of approximately 4.8% and raised its EPS estimate from its prior level of $4.52 to a new level of $4.54. Home Depot also affirmed its intention to repurchase a total of $7 billion in common stock in 2014. The company said it had bought back $5.74 billion in the first three quarters of the fiscal year and expects to repurchase $1.26 billion shares in the fourth quarter.

The company noted that its EPS estimate includes approximately $34 million related to costs of the data breach it reported earlier this year. Home Depot also said that it does not know what the final tally could be and the costs could have a material effect on the company’s results in the fourth quarter and may drag on into future quarters.

The consensus fourth-quarter estimates call for EPS of $0.90 on revenues of $18.7 billion. For the full year, EPS is projected at $4.50, on revenues of $82.67 billion. The current consensus estimates for the 2015 fiscal year call for EPS of $5.23 on revenues of $86.34 billion.

Home Depot’s CEO said:

During the quarter we saw strong performance across all geographies led by growth in transactions and continued strength in the core of the store.

The boost to the company’s EPS guidance combined with beating estimates on both earnings and revenues is offset by the uncertainty regarding the cost to the company of the data breach that resulted in the theft of 56 million customer records. The $34 million cost attributed to the third quarter is most likely the beginning, not the end of the costs to the company.

Shares were down about 0.5% in premarket trading, at $97.50 in a 52-week range of $72.21 to $99.36. Thomson Reuters had a consensus analyst price target of around $100.00 before the results were announced.

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