Home Depot Inc (HD): Broad based Growth to drive 1Q Results

Home Depot Inc (NYSE:HD) is expected to witness a solid quarter as far as the demand for renovation is concerned. There are a lot of analysts who believe that the company provides multiyear sales drivers such as continued strength in the recovery of the housing market. This apart, the company is expected to have post solid sales numbers for the first quarter.

Factors to Consider

Home Depot Inc (NYSE:HD) would have continued to witness a wider growth in every geography in the first quarter. This was also demonstrated in the fourth quarter results where its three divisions in the United States surpassed their sales target. This apart, all 19 regions witnessed mid-single digit comparable store sales growth or better.

However, the fourth quarter would have benefited from the holiday season factor. Q1 is a seasonally stronger quarter for the company than the holiday season as home improvement projects pick up in the spring, and summer. The company’s results for the first quarter would reflect the kind of recovery in housing. This apart, GDP growth should have helped though it witnessed only 20 basis points improvement in the March quarter. The slower than expected GDP is more due to cutbacks in oil production. The strong Greenback also hurt its exports badly in the first quarter as inventories piled up.

Home Depot Inc (NYSE:HD) should have also capitalized the lower global oil prices in the first quarter. In fact, it was only in January that the worldwide oil price reached the five-year low. Lower gasoline and oil prices would have allowed consumers to spend a little more towards home improvement.

COMPS Growth

In the past quarter, the company’s Mexican division recorded 45 straight positive comps while the Canadian units witnessed 13 consecutive positive comps. The company’s integration of HD supply hardware solutions should add revenue in the first quarter. Home Depot Inc (NYSE:HD) has also been estimating COMS to grow 4.5% in the United States and 3.3 – 4.5% globally.

The company also planned to launch six more fresh stores apart from expanding its operating margins by 60 basis points. Interestingly, Deutsche Bank analyst said that the cost per employee of Home Depot was $42,922, which was lower than its peer’s $46,759. This should boost its margin.

What To Expect

Wall Street analysts’ have consensus earnings expectation of $1.15 a share for Home Depot Inc (NYSE:HD). Similarly, they have revenue projection of $20.82 billion for the first quarter. Analysts’ estimation indicated EPS growth of 19.8% and revenue uptick of 5.7% as it delivered EPS of 96 cents and 19.69 billion of revenue in the year-ago quarter.

Significantly, analysts’ have not changed their EPS projections in the last three-month period. Though they have slightly reduced it to $1.14 cents a share two months ago, they have lifted it again to $1.15 a share a week back. Its earnings failed to meet the Street expectations in two out of the last four quarters. Home Depot Inc (NYSE:HD) will report its financial numbers on May 19 before the bell.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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