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Strong Sales in the First Half of 2018 Drove Home Depot Stock

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Stock performance

Home Depot (HD) stock has risen 7.5% year-to-date, driven by strong performances in the first and second quarters of 2018 and an increase in housing prices.

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Revenue growth

In the first half of 2018, Home Depot posted revenue of $55.41 billion, a 6.6% growth from $52 billion in the first half of 2017. Growth was driven by the adoption of a new accounting standard that contributed $66 million, positive SSSG (same-store sales growth) of 6.2%, and the addition of four new stores in the last four quarters.

Home Depot’s SSSG was driven by an increase in comparable customer transactions of 0.9% and growth in the comparable average ticket of 5.3%. Its investment in creating an interconnected shopping experience has improved customer satisfaction, thus driving sales.

Home Depot operated 2,286 stores at the end of the first half of 2018 compared to 2,282 stores at the end of the first half of 2017.

EPS growth

Home Depot had adjusted EPS of $5.13 in the first half of 2018, which is a 30.9% rise from $3.92 in the first half of 2017. Growth was driven by revenue growth, expansion of its net margin, and share repurchases.

Its net margin improved from 9% to 10.7% due to an increase in its gross margin and a lower effective tax rate. That was partially offset by higher SG&A (selling, general, and administrative) expenses.

Outlook

Home Depot’s management expects 2018 revenue to rise 7% with SSSG of 5.3% and the opening of three new stores. Its guidance includes an extra week of operations in 2018.

For 2018, analysts expect Home Depot to post revenue of $108.3 billion, which would be a growth of 7.3% from $100.9 billion in 2017. They expect EPS to rise 28.2% to $9.56.

Next, let’s see why Bed Bath & Beyond stock has fallen in 2018.

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