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Did Home Depot Beat Wall Street Expectations for Fiscal 2016?

Phalguni Soni - Author
By

Aug. 18 2020, Updated 5:18 a.m. ET

4Q16 and fiscal 2016 results

Home Depot (HD) declared results for the fourth quarter and fiscal 2016 on February 23. The quarter ended on January 31, 2016. The retailer (RTH) (FXD) reported record results for both the quarter and the fiscal year. Home Depot also beat market expectations for both revenue and adjusted earnings per share (or EPS) in the fourth quarter. Fiscal 4Q16 marks the seventh straight quarter of better-than-expected revenue and earnings by the world’s largest home improvement retailer (XRT) (XLY).

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Results outperform expectations

Fiscal 2016 revenue grew 6.4% year-over-year (or YoY) to $88.5 billion, which was ahead of the company’s guidance of $88 billion. In fiscal 4Q16, revenue came in at ~$21 billion, up 9.5% YoY. Fourth quarter revenue also beat consensus Wall Street analyst estimates by a long shot. The market consensus had projected revenue of $20.4 billion.

Home Depot reported EPS of $1.17 in 4Q16, an increase of 11.4% YoY. This was 6.3% ahead of the market consensus figure of $1.10. For the full fiscal year, HD’s EPS rose 15.9% YoY to $5.46. Full-year fiscal 2016 EPS beat the company’s guidance of $5.36.

Key drivers

Home Depot’s results benefited from a resurgent housing market (XHB) (ITB), a low interest rate environment, and higher consumer employment and incomes. Consumers also appeared to favor discretionary spending on pricier purchases over the course of the year for both Home Depot and rival Lowe’s (LOW). This trend has also benefited home furnishing and furniture firms like Restoration Hardware (RH) and Williams-Sonoma (WSM).

Home Depot’s omni-channel model and productivity initiatives have also benefited the retailer’s earnings. Digital benchmarking site L2 ranked HD the number one web portal among big box retailers. The company also received the “Internet Retailer of the Year” award by Internet Retailer last year.

However, currency factors from HD’s businesses in Canada and Mexico continued to pose headwinds. We’ll discuss the positives and the negatives in HD’s earnings release and conference call in greater detail in this series.

Home Depot, Lowe’s, and Bed Bath & Beyond together make up 10.4% of the portfolio holdings in the Consumer Discretionary Select Sector SPDR Fund (XLY). Home Depot, Lowe’s, Williams-Sonoma (WSM), and Bed Bath & Beyond together make up 18.2% of the portfolio holdings in the Consumer Discretionary Select Sector SPDR Fund (XLY).

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