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Will Home Depot Outperform Analysts’ EPS Estimate in Q1 2019?

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Analysts’ EPS estimates

Analysts expect Home Depot (HD) to post first-quarter adjusted EPS of $2.18, a rise of 5.0% from $2.08 in the corresponding quarter of 2018. Its revenue growth and share repurchases in the last four quarters are likely to drive its EPS during the quarter. However, the contraction in its EBIT margin, its higher interest expenses, and its higher effective tax rate are expected to offset some of the rise in its EPS.

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Analysts expect Home Depot’s EBIT margin to contract marginally from 13.6% in the first quarter of 2018 to 13.5% in the first quarter of 2019. The company’s strategic investments in its growth initiatives are likely to cause its EBIT margin to contract during the quarter. However, some of the declines are expected to be offset by the implementation of cost-control initiatives and sales leverage from positive SSSG (same-store sales growth).

For the first quarter, analysts expect the company’s effective tax rate to be 25.5% compared to 23.5% in the corresponding quarter of 2018. From the beginning of the second quarter of 2018 to the end of the fourth quarter of 2018, the company has repurchased 49.6 million shares for $9 billion. In February, the company’s board authorized a new share repurchase program worth $15 billion, replacing its existing share repurchase program.

Peer comparison

For the comparable quarter, analysts expect Lowe’s Companies (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) to post EPS changes of 12.8%, 3.7%, and -76.5%, respectively.

For 2019, Home Depot’s management is expecting its diluted EPS to rise 3.1% to $10.03. Analysts expect the company to post adjusted EPS of $10.09, which represents a rise of 2.0% from $9.89 in 2018.

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