House Depot (HD) earnings This fall 2020 prime estimates

Home Depot’s fourth quarter earnings exceeded investor expectations on Tuesday as consumers continued to invest in their homes amid the pandemic and strength of the property market.

Shares fell more than 3% in premarket trading after the company failed to provide an outlook for the year.

Richard McPhail, Home Depot’s chief financial officer, said the retailer was unsure how long the pandemic would last and how it could affect consumer spending. He said if demand continues from the second half of last year, it would translate into slightly positive revenue growth in the same business and an operating margin of at least 14% this year.

The company reported for the quarter ended January 31st, versus Wall Street’s expectations, based on an analyst survey conducted by Refinitiv:

  • Earnings per share: $ 2.65 versus $ 2.62 expected
  • Revenue: $ 32.26 billion versus $ 30.73 billion expected

Home Depot net income rose to $ 2.86 billion, or $ 2.65 per share, from $ 2.48 billion, or $ 2.28 per share last year. Analysts surveyed by Refinitiv expect earnings per share of $ 2.62.

Net sales rose 25% to $ 32.26 billion from $ 25.78 billion a year ago, beating estimates of $ 30.73 billion.

Sales in the same store in the US increased 25%. According to a StreetAccount survey, total revenue in the same store rose 24.5%, above the 19.2% growth forecast by analysts. The growth is in line with what Home Depot reported in the second and third quarters as it benefited from keeping its doors open as a major retailer.

Customers spent more when they visited the store. According to Home Depot, the value of a customer’s average purchase price increased nearly 11% to $ 75.69 from the same period last year. Revenue per square foot increased 24% to $ 528.01.

Home Depot faces tough comparisons in the quarters ahead due to the huge numbers it put up during the pandemic. It may also have to work harder for wallet sharing as consumers get Covid-19 vaccines and spend the weekends for dinner or vacation instead of painting or doing repair projects.

One ray of hope, however, could be a potential home business resurgence as consumers feel more comfortable inviting people into their homes and paying for projects they put off or couldn’t tackle on their own.

About 45% of Home Depot’s sales come from professionals such as plumbers, electricians, and contractors, with the remainder from home improvement customers. That’s a higher percentage of rivals Lowe’s, who get 20% to 25% of their sales from professionals.

Home Depot would like to expand this advantage with HD Supply. The company acquired the company’s former entity and large industrial product distributor valued at $ 8 billion.

Fourth quarter results were adversely affected by pre-tax charges of $ 110 million, or 9 cents per share, tied to the deal.

At the close of trading on Monday, Home Depot shares were up more than 12% year over year. The company’s market value is $ 296.98 billion.

Home Depot also announced Tuesday that its board has approved a 10% increase in its quarterly dividend to $ 1.65 per share.

Read the full press release here.

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