The world’s largest home improvement retailer, Home Depot (HD), announced its 3Q17 earnings on November 14, 2017. The company posted adjusted EPS of $1.87 on revenues of $25.0 billion. Compared to 3Q16, the company’s EPS rose 16.9%, while revenues rose 8.1%.
Analysts were expecting Home Depot to post EPS of $1.82 on revenues of $24.6 billion. Also, the company outperformed analysts’ SSSG (same-store sales growth) estimates of 5.9% with SSSG of 7.9%. With recovery efforts after the devastation caused by hurricanes expected to continue in 4Q17, the company’s management has raised its revenue, SSSG, and EPS guidance for 2017. Despite posting strong 3Q17 earnings, Home Depot was trading close to its November 13, 2017, stock price due to weakness in the broader equity market. On November 15, 2017, US stocks fell due to uncertainty surrounding the passage of tax reforms and a decline in oil prices.
2017 has been a good year for Home Depot with the stock returning 23.4% since the beginning of the year. During the same period, its peers, Lowe’s Companies (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 10.2%, 4.9%, and -50.9%, respectively.
The S&P 500 Index (SPX) and the SPDR S&P Homebuilders ETF (XHB) have returned 14.6% and 21.2%, respectively. XHB invests approximately 22.0% of its holdings in home furnishing and home improvement companies.
In this series, we’ll look at Home Depot’s 3Q17 earnings call and also compare the company’s performance with analysts’ expectations. We’ll also cover management’s 2017 guidance and analysts’ expectations for the next four quarters. Finally, we’ll wrap this series up by looking at Home Depot’s valuation multiple and analysts’ recommendations.
Let’s start our analysis by looking at Home Depot’s 3Q17 revenue.