What To Expect From Home Depot Inc (HD)’s Earnings?

The housing market took a long time to recover from the shocks suffered in the financial crisis. Home Depot Inc (NYSE:HD) was also the sufferer since the consumer tightened their purse strings for a long time. It is only in the last two years or so, the company could see some favorable momentum in the sector. The company also reached a stage to buy Interline Brands most recently.

Key Points To Look

For Home Depot Inc (NYSE:HD), the key is the housing market. Also, the economy should do well in the country. In the second quarter, the United States has not witnessed any issues in respect of either its economy or the housing market conditions. The housing sector is looking somewhat solid now than what it was a few years ago. Though housing prices witnessed an uptick in some region, there was not enough strength to sustain it in the past. Now those conditions seemed to have been passed.

The weaker international oil price and gasoline price back at home should allow consumers to spend a little more on home improvements. The weak interest rate for a prolonged time should also be a factor in favor of spending more on the home improvements.

Momentum To Be Carried On

Home Depot Inc (NYSE:HD) had a strong start for the year when it experienced a normal spring season in most part of the country in the first quarter. The company also witnessed a continuous recovery in the housing market in the Americas. That should have continued in the second quarter too, i.e. the momentum could have been carried to the second quarter also.

On the whole, the home retailer’s comparable store sales witnessed a positive 6.1% and the United States comparable store sales were positive 7.1% in the same period. The momentum in the comparable store sales was most likely carried in the second quarter too.

Interline Brands Acquisition A Positive Move

Credit Suisse said that Home Depot Inc (NYSE:HD)’s recent acquisition of Interline Brands is a positive move. That will offer additional distribution capabilities, and a big sales force, apart from the incremental opportunities in the category in the JanSan market. All these things would improve the company’s Pro offering. One of the possible upside for earnings is the pro market fragmentation.

Credit Suisse expects the acquisition to add 6 – 8 cents a share in the fiscal year 2016. That meant the continuation of high-single digit EBITDA uptick in 2016.

Earnings Expectations

Home Depot earnings also depend on the gross margins. The company should have either maintained the same level of gross margins or slightly upward wind. Street analysts expect Home Depot Inc (NYSE:HD) to earn $1.71 a share and $46.68 billion revenue for the second quarter. While EPS projection indicated 12.5% uptick in EPS, revenue represented 3.6% YOY growth. The company will report its earnings results on August 18 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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