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Why the Market Is Optimistic about Home Depot's 2017

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Why the Market Is Optimistic about Home Depot's 2017 PART 1 OF 9

Home Depot’s Stock Price Rises on Strong 4Q16 Earnings

4Q16 performance

Home Depot (HD) is the largest home improvement retailer in the world, with 2,278 stores spread across the United States, Canada, and Mexico.

The company announced its earnings on February 21, 2017. It posted adjusted EPS (earnings per share) of $1.44 on revenue of $22.2 billion.

Home Depot&#8217;s Stock Price Rises on Strong 4Q16 Earnings

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Market response

Analysts were expecting the company to post EPS of $1.32 on revenue of $21.8 billion. After posting strong 4Q16 earnings, the company’s management set its EPS growth guidance at 10.5% for 2017, and it announced the authorization of a new $15 billion share repurchase program.

All these factors appear to have increased investors’ confidence in HD, leading to a rise in its stock price. On February 22, 2017, Home Depot was trading at $145.25, a rise of 1.6% since the announcement of its 4Q16 earnings.

Year-to-date performance

Since the beginning of 2017, Home Depot’s stock price has risen 8.3%. The rise in the housing price index, higher housing turnover, and the improving American economy appear to have led to the rise in Home Depot stock. 

During the same period, Home Depot’s peers Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 8%, -0.4%, and 1.2%, respectively.

Since the beginning of 2017, the SPDR S&P Homebuilders ETF (XHB), the broader comparative index, has returned 5.9%. XHB invests more than 19.0% of its holdings in home improvement retailers.

Series overview

In this series, we’ll take a look at Home Depot’s 4Q16 earnings call and notes. We’ll look at the company’s performances in key metrics during the quarter and cover its management’s guidance as well as analysts’ estimates for 2017.

Let’s start by looking at Home Depot’s 4Q16 revenue in detail.

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