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Why Home Depot Is Trading Close to Its 52-Week High

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Part 2
Why Home Depot Is Trading Close to Its 52-Week High PART 2 OF 3

Why Analysts Expect Home Depot’s EPS to Rise in Next 4 Quarters

EPS estimates

In the next four quarters, analysts are expecting Home Depot (HD) to post EPS (earnings per share) of $7.77, which represents growth of 11.6% from $6.96 in the corresponding four quarters of the previous year.

Why Analysts Expect Home Depot&#8217;s EPS to Rise in Next 4 Quarters

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EPS growth

Analysts are expecting growth in Home Depot’s revenue, expansion of net margins, and share repurchases to drive Home Depot’s EPS. For the next four quarters, analysts are expecting the company’s revenue to rise 5.0%, while its net margins are expected to improve 8.7% to 8.8%. In the last four quarters, the company has repurchased shares worth $8.4 billion, and by the end of 2Q17, it had $3.2 billion available under its repurchase program. Share repurchases drive the company’s EPS by lowering the number of shares outstanding.

2017 management guidance

In 2017, Home Depot’s management expects the company’s EPS to be at $7.29, which represents growth of 13.0% from $6.45 in 2016. During the same period, the company’s management expects its SSSG (same-store sales growth) to be in the range of 5.5%, while its revenue is expected to rise 5.3%.

Peer comparisons

For the next four quarters, analysts are expecting the EPS of Lowe’s Companies (LOW) and Williams-Sonoma (WSM) to rise 11.1% and 5.5%, respectively. However, during the same period, the EPS of Bed Bath & Beyond (BBBY) could fall 28.0%.

Next, we’ll look at analysts’ recommendations and the company’s valuation.

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