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Home Depot Misses Top-Line and Bottom-Line Estimates in Q4

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Feb. 26 2019, Published 8:19 a.m. ET

Fourth-quarter performance

Home Depot (HD) reported its fourth-quarter results today. For the quarter ended on February 3, the company posted adjusted EPS of $2.09 on revenues of $26.49 billion, which fell short of analysts’ EPS expectation of $2.16 and revenue expectation of $26.57 billion. Also, the company’s SSSG (same-store sales growth) of 3.2% failed to meet analysts’ SSSG expectation of 4.5%. The weak fourth-quarter results led to a fall in Home Depot’s stock price. The company was trading 2.5% lower in today’s pre-trading hours.

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Year-over-year revenue growth

For the quarter, Home Depot posted revenues of $26.49 billion, which represents growth of 10.9% from $23.88 billion in the corresponding quarter of 2017. The revenue growth was driven by one extra week of operations, the adoption of a new accounting standard, positive SSSG, and the addition of three new stores in the last four quarters. In the fourth quarter of 2018, the company had 14 weeks compared to 13 weeks in the corresponding quarter of 2017. The extra week contributed $1.7 billion to the company’s revenue, while the adoption of the new accounting standard added $86 million.

Year-over-year EPS growth

Home Depot posted adjusted EPS of $2.09, which represents growth of 23.7% from $1.69 in the corresponding quarter of 2017. The EPS growth was driven by revenue growth, expansion of EBIT margin, a lower effective tax rate, and share repurchases in 2018. During the quarter, Home Depot’s EBIT margin improved from 13.4% to 13.7%. The company’s effective tax rate for the quarter stood at 24.7% compared to 32.8% in the corresponding quarter of 2017.

Today, the company announced quarterly dividends of $1.36 per share, which represents a rise of 32% from its previous quarter. Also, Home Depot’s board authorized a new share repurchase program of $15 billion, replacing its previous share repurchase program.

2019 guidance

For 2019, Home Depot’s management expects its revenue to rise by 3.3% with SSSG of 5.0% and the net addition of five new stores. Management is also expecting its diluted EPS to rise by 3.1% to $10.03 in 2019.

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