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Home Depot Stock Jumps after Impressive Q4 Earnings

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Today, Home Depot (NYSE:HD) reported its earnings results for the fourth quarter of fiscal 2019. For the quarter, the company posted revenue of $25.78 billion, which beat analysts’ expectation of $25.76 billion. Home Depot’s same-store sales grew 5.2% compared to analysts’ expectations of 4.8%. The company reported an adjusted EPS of $2.28, which beat analysts’ estimate of $2.10 by 8.6%. The company’s stock price traded higher due to its impressive fourth-quarter performance. Home Depot was trading 2.7% higher in today’s pre-market trading hours.

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Home Depot’s performance

Although Home Depot beat analysts’ revenue expectations, its revenue fell by 2.7% from $26.49 billion in fourth quarter of the previous year. The company’s fourth-quarter of 2018 had 14 weeks of operations compared to 13 in the fourth quarter of 2019. The extra week of operations contributed $1.7 billion of sales to the company’s revenue in the fourth quarter of 2018.

For the fourth quarter, Home Depot’s net profits were $2.48 billion, which translated to a diluted EPS of $2.29. However, removing special items, the company’s adjusted EPS was $2.28—an increase of 8.6% from $2.10 in the same quarter of the previous year. The lower operating expenses, lower effective tax rate, and a decline in the number of shares outstanding drove the company’s EPS. However, one extra week of operations in the fourth quarter of 2018 contributed $0.21 per diluted share. For the quarter, the company’s operating expense as a percentage of total revenue fell from 21.3% to 20.7%. Also, in 2019, the company repurchased approximately $7.0 billion worth of shares, which lowered the number of shares outstanding.

Home Depot raised its quarterly dividends

Today, Home Depot announced that its board agreed to increase its quarterly dividends per share by 10% to $1.50. The company will pay dividends on March 26 to shareholders recorded as of March 12. The new dividend represents an annualized payout of $6.0 per share.

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Outlook

For 2020, Home Depot’s management expects its revenue to rise by 3.5%–4.0%. The company’s management expects that opening six new stores and an SSSG of 3.5%–4.0% could drive its revenue in 2020. Also, management expects its operating margin to be 14% lower than 14.4% that the company posted in 2019. For 2020, management expects the interest expenses to be $1.2 billion, while its effective tax rate could be 24.0%. Home Depot’s management plans to repurchase shares worth $5.0 billion in 2020. Management expects the EPS to be $10.45, which represents 2% growth from $10.25 in 2019.

Stock performance

Since the beginning of this year, Home Depot has returned 9.8% as of Monday. We expect the company’s impressive fourth-quarter performance to drive its stock price more. Meanwhile, Home Depot has outperformed its peers this year. Lowe’s (NYSE:LOW), Williams-Sonoma (NYSE:WSM), and RH (NYSE:RH) have returned 2.6%, -6.4%, and 2.3% YTD, respectively. Lowe’s will report its fourth-quarter earnings on Wednesday. To learn more, read What to Expect from Lowe’s Q4 Earnings.

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