Why Investors Are Optimistic of Home Depot ahead of Its 1Q17 Earnings
Home Depot (HD), the largest home improvement retailer in the world, will announce its 1Q17 earnings before the market opens on May 16, 2017. The company operates 2,278 stores across the US, Canada, and Mexico.
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Since the announcement of its 4Q16 earnings on February 21, 2017, the company’s stock has risen 10.6%. In 4Q16, the company posted adjusted EPS (earnings per share) of $1.44 on revenue of $22.2 billion. Analysts were expecting the company to post EPS of $1.32 on revenue of $21.8 billion.
The rise in the housing price index, the increase in home sales in March 2017, and the improving employment data also contributed to the rise in HD’s stock price.
According to the NAR (National Association of Realtors), home sales in March 2017 rose 4.4%. In February 2017, the S&P CoreLogic Case-Shiller US National Home Price NSA Index had announced that the national home price index had risen 5.8%. Notably, in April 2017, the unemployment rate dropped to the ten-year low of 4.4%.
Calendar 2016 was a tough year for Home Depot, with the stock rising only 1.4%. However, the stock has started 2017 on a good note and has now returned 17.9% YTD (year-to-date). During the same period, peers Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 21.0%, 12.8%, and -7.3%, respectively.
By comparison, the S&P 500 INDEX (SPX), and the SPDR S&P Homebuilders ETF (XHB) have returned 7.2%, and 12.6%, respectively.
In this series, we’ll examine the analysts’ estimates for HD’s revenue, margins, and EPS. We’ll also discuss HD’s valuation multiple and the analysts’ recommendations for the next 12 months.
Let’s start by looking at analysts’ revenue estimate for 1Q17.