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Can Home Depot’s 2Q17 Earnings Outperform Analysts’ Estimates?

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Part 4
Can Home Depot’s 2Q17 Earnings Outperform Analysts’ Estimates? PART 4 OF 6

Analysts Are Optimistic about Home Depot’s 2Q17 Earnings

2Q17 estimates

In 2Q17, Home Depot (HD) is expected to post EPS (earnings per share) of $2.21, which represents a rise of 12.2% from $1.44 in 2Q16. EPS is expected to be driven by revenue growth, expansion of net margins, and share repurchases.

Analysts Are Optimistic about Home Depot&#8217;s 2Q17 Earnings

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From the beginning of 3Q16 through the end of 1Q17, Home Depot has repurchased shares worth $5.8 billion. By the end of 1Q17, the company had the authorization to repurchase shares worth $3.8 billion over the next three quarters. Share repurchases reduce the number of shares outstanding, thus boosting the company’s EPS.

From the above graph, you can see that the company has outperformed analysts’ EPS estimates in the past five quarters. When that happens, the stock tends to rise.

Peer comparisons and outlook

In 2Q17, analysts are expecting Lowe’s (LOW) and Williams-Sonoma (WSM) to post EPS growth of 18.1% and 1.7%, respectively. For that same quarter, EPS for Bed Bath & Beyond (BBBY) is expected to fall 14.5%.

For the next four quarters, analysts are expecting Home Depot to post EPS of $7.41, which represents a rise of 10.9% from $6.68 in the corresponding quarters of the previous year. Home Depot’s management has set its 2017 EPS guidance at $7.15.

Dividends

In 1Q17, Home Depot paid dividends of $0.89 at a dividend yield of 2.3% and a payout ratio of 49.2%. For the next three quarters, analysts are expecting the company to pay dividends of $2.61 to take the total for 2017 to $3.50, which represents a rise of 26.8%.

Next, let’s take a look at Home Depot’s valuation multiple.

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