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Home Depot Beat Lowe’s EPS Growth in First Quarter

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Jun. 6 2019, Updated 3:07 p.m. ET

Home Depot’s EPS growth

Home Depot (HD) posted adjusted EPS of $2.27 in the first quarter of 2019, which represents a rise of 9.1% from $2.08 in the corresponding quarter of 2018. The revenue growth and lower weighted average common share count drove the company’s EPS during the quarter.

For the quarter, Home Depot’s net margin came in at 9.5%, slightly lower than the 9.6% the company posted in the corresponding quarter of the previous year. The lower gross margin, increased interest expenses, and higher effective tax rate lowered Home Depot’s net margin. However, some of the declines were offset by lower operating expenses.

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The unfavorable product mix, higher shrink costs compared to the previous year, and higher supply chain and fulfillment expenses lowered Home Depot’s gross margin by 36 basis points. The improvement in its operational productivity decreased the company’s operating expenses, which partially offset the increased costs associated with its strategic investments. For the quarter, the company’s interest expenses increased by $27 million, while its effective tax rate stood at 24.4% compared to 23.5% in the corresponding quarter of 2018.

In the last four quarters, HD repurchased ~56 million shares for ~$10.3 billion, lowering the weighted average common share count to ~1.1 billion shares for the quarter compared to ~1.16 billion shares in the corresponding quarter of fiscal 2018.

Lowe’s EPS growth

Lowe’s Companies (LOW) posted adjusted EPS of $1.22, which represents growth of 2.5% from $1.19 in the first quarter of 2018. The increase in revenue and lower weighted average common shares outstanding drove the company’s revenue, while the decline in net margins offset some of the gains in the company’s EPS growth.

For the first quarter, Lowe’s net margins came in at 5.5% lower than the company’s net margin of 5.7% in the first quarter of 2018. The lower gross margin and a higher effective tax rate lowered the company’s net margin during the quarter. However, favorable SG&A (selling, general, and administrative) expenses offset some of the declines in net margin.

The ineffective pricing tools and processes, higher supply chain costs, and unfavorable product mix lowered the company’s gross margins. The company’s SG&A expenses fell 89 basis points due to lower salary expenses and improvement in advertising efficiency. The company’s effective tax rate for the quarter stood at 16.6% compared to 24.3% in the corresponding quarter of the previous year.

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