Excellent earnings trajectory
Home Depot’s (HD) adjusted earnings and sales have successfully beaten the consensus estimates for the last eight out of nine quarters. The largest house improvement retailer (RTH) recorded adjusted EPS (earnings per share) growth of 24.1% to $1.44 in 1Q16. Home Depot is scheduled to announce its 2Q16 results on August 16.
Recap of 1Q16 earnings
Home Depot’s 1Q16 adjusted EPS surpassed the consensus analyst estimate of $1.35. The 24.1% growth in 1Q16 adjusted EPS was driven by impressive sales growth and cost management. We discussed the company’s sales in part two of this series.
Home Depot’s earnings in 1Q16 were also favorably impacted by share buybacks. Share buybacks or repurchases enhance EPS by reducing the share count. The company’s diluted weighted average share count was down 4.1% in 1Q16. Home Depot repurchased 9.5 million shares for about $1.3 billion in 1Q16.
The adjusted EPS growth of Home Depot in 1Q16 outpaced its peers. Bed Bath & Beyond’s (BBBY) 1Q16 adjusted EPS fell by 14% to $0.80 due to flat sales numbers. Williams-Sonoma’s (WSM) adjusted earnings spiked by 10.4% to $0.53 in 1Q16 driven by its sales growth. Lowe’s (LOW) adjusted EPS grew 24.3% to $0.87 in 1Q16, triggered by the sales numbers and higher margins.
Home Depot raised its fiscal 2016 earnings and revenue outlook after its impressive 1Q16 results. The company expects its diluted EPS to grow by 14.8% to $6.27. This estimate is based on a sales growth expectation of 6.3% and same-store sales growth estimate of 4.9% for fiscal 2016.
For 2Q16, analysts expect the company’s adjusted EPS to rise by 15.2% to $1.97. We’ll discuss Home Depot’s margins in the next part of this series.