The Home Depot, Inc (HD) Earnings Preview 3Q

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Photo by Ildar Sagdejev

Photo by Ildar Sagdejev

The Home Depot, Inc (NYSE:HD) Earnings Preview 3Q

Home Depot (NYSE:HD) will report 3rd quarter Fiscal Year 2014 earnings before market open on Tuesday, November 18th, 2014.

In the short term, focus is on Home Depot’s breach that involved 53 million customers. The company has warned that the breach may have a material adverse effect that they cannot calculate. In the longer term the home improvement sector should have appealing long-term growth characteristics from rising U.S. homeownership and favorable demographic data pointing to up-side for refurbishment spending. According to the latest Census bureau, approximately 69% of homes are more than 25 years old. The sector also carries less risk than traditional retail for the encroachment of online retailers like Amazon Inc (NASDAQ:AMZN).

Over the last several years the company has driven value through transformation of it’s supply chain. The use of rapid deployment centers as opposed to direct to store should widen operating margins.

Company investing in Online

The company continues to invest in it’s dot com business and has spent a lot of time focusing on delivery. The company already does a lot of deliveries from store, but now will begin the roll out of “buy online, deliver from store”.

35%-40% of business comes from “Pro Customers”


At the Goldman Sachs Global Retailing Conference in September, Home Depot Chairman and Chief Executive Officer Frank Blake said it was important to understand that between 35 to 40 percent of their business comes from their “Pro Customers” whom only comprise 4% of their total client base despite their outsized sales impact. It was noted that during the downturn these 4 percent were hit hardest and underperformed the rest of their consumer base while declining dramatically and then as the economy recovered they recovered more rapidly.

Wall Street Expectations

Analysts are expecting the company to earn $1.13 per share up from 93 cents per share in the same period a year ago. Revenue is expected to be at ~$20.4 billion up from ~$19.5 billion in the 3rd quarter last year.

 

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