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What Drove Home Depot’s and Lowe’s EPS in 2018

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Home Depot’s EPS growth

In 2018, Home Depot (HD) posted adjusted EPS of $9.89, which represents growth of 32.6% from $7.46 in 2017. HomeDepot’s EPS growth was driven by revenue growth, the expansion of its EBIT margin, a decline in its effective tax rate, and share repurchases.

In 2018, Home Depot’s EBIT margin improved from 14.5% in 2017 to $14.6%. The expansion was driven by cost control initiatives and partially offset by investments its strategic initiatives. For 2018, the company’s effective tax rate stood at 23.6%, compared to 35.5% in 2017.

Home Depot repurchased 54.3 million shares for ~$10 billion in 2018.

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Lowe’s EPS growth

Lowe’s Companies (LOW) posted adjusted EPS of $5.10 in 2018, which represents growth of 16.2% from $4.39 in 2017. Lowe’s EPS growth was driven by revenue growth, a lower effective tax rate, and share repurchases in the last four quarters. However, the decline in its EBIT margin offset some of the growth in its EPS.

Lowe’s EBIT margin for 2018 stood at 8.6%, compared to 9.7% in 2017. The decline in its gross margin and an increase in SG&A expenses lowered the company’s EBIT margin. In 2018, the company’s effective tax rate stood at 31.8%, compared to 37.2% in 2017. Lowe’s has repurchased 31.9 million shares for $3.04 billion in 2018.

Dividends

On February 26, Home Depot announced quarterly dividends of $1.36 per share, which represents an annualized payout of $5.44 per share. As of March 6, the company’s dividend yield stood at 2.96%, with its stock price trading at $184.45.

Lowe’s had announced quarterly dividends of $0.48 per share on November 9. The company’s dividend yield stood at 1.86% as of March 6, with its stock price trading at $102.34.

Next in this series, we’ll look at analysts’ expectations for Home Depot in 2019.

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