Management’s guidance

Home Depot’s management forecasts its diluted EPS to rise by 3.1% to $10.03 in 2019. For the same period, analysts are expecting Home Depot (HD) to report adjusted EPS of $10.12, which implies a rise of 2.3% from $9.89 in 2018. The revenue growth and lower number of shares outstanding due to share repurchases are likely to drive Home Depot’s EPS. However, some of the increase in HD’s EPS is likely to be offset by a decline in EBIT margin, an increase in interest expenses, and a higher effective tax rate.

What Do Analysts Expect from Home Depot’s EPS in 2019?

Analysts expect Home Depot’s EBIT margin to fall from 14.6% in 2018 to 14.4%. Lower gross margins and higher SG&A (selling, general, and administrative) expenses are likely to lower the company’s EBIT margin. The company’s investments in growth initiatives are expected to increase its SG&A expenses. For 2019, analysts expect the company’s effective tax rate to be at 25.3% compared to 23.6% in 2018.

In February 2019, the company had authorized a new share repurchase program of $15 billion replacing the previous authorizations. In the first quarter, Home Depot had repurchased 6.5 million shares for $1.25 billion.

Peer comparison

For 2019, analysts expect Lowe’s Companies (LOW) to report adjusted EPS of $5.57, which represents a rise of 9.2% from $5.10 in the previous year.

Dividends

On May 23, Home Depot had declared quarterly dividends of $1.36 per share at an annualized payout of $5.44 per share. As of June 21, the company’s dividend yield stood at 2.60% with its stock price trading at $209.39. On the same day, Lowe’s dividend yield stood at 2.18%.

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