Home Depot Raises Dividend Following Record Earnings

Home Depot Inc. (NYSE: HD) reported fourth-quarter and full-year 2015 results before markets opened Tuesday. The home improvement retailer posted quarterly diluted earnings per share (EPS) of $1.17 and $21 billion in revenues. In the same period a year ago, the home improvement store reported EPS of $1.05 on revenue of $19.16 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.10 and $20.39 billion in revenue.

For the full year, Home Depot reported EPS of $5.46 and revenues of $88.52 billion, compared with EPS of $4.71 and revenues of $83.18 billion in 2014. Analysts were looking for EPS of $5.34 and revenues of $88.14 billion.

Fourth-quarter same-store sales at all Home Depot locations rose 7.1% year over year and rose 8.9% in the United States.

Home Depot raised its dividend by 17% from a quarterly rate of $0.59 to a new rate of $0.69 per share. The company also reiterated its intent to repurchase $11 billion of its own stock by the end of fiscal year 2017.

The company presented its full-year guidance for the 2016 fiscal year. Home Depot expects sales to rise by 5.1% to 6.0% and same-store sales to rise by 3.7% to 4.5%. Diluted EPS after an expected $5 billion in share buybacks is projected to rise 12% to 13% to a range of $6.12 to $6.18. Gross margin is forecast to be flat and operating margin is forecast to improve by 0.7%.
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Home Depot noted that if currency exchange rates remain at current levels, net sales for 2016 would decline by $800 million and EPS would be lower by $0.06. The low end of the company’s estimates reflects this impact.

The consensus estimates for the first quarter call for $1.34 in EPS on sales of $22.17 billion. For the full year, analysts are looking for EPS of $6.16 on sales of $93.12 billion.

The company said its 2015 results include $128 million ($0.06 per share) in expenses related to the data breach the company suffered in September 2014. An expense of $9 million in the fourth quarter had no effect on EPS.

The stock traded up about 2.8% in Tuesday’s premarket, at $126.32 in a 52-week range of $92.17 to $135.47. The consensus price target on the stock is $140.81, and the highest target is $155.00.