Home Depot Beats Consensus, Will Growth Continue For FY 2019?

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Home Depot

Home Depot (NYSE: HD) announced its Q1 2019 (ended April 2019) results on May 21, 2019, followed by a conference call with analysts. The company just beat consensus for revenue which was recorded at $26.4 billion, up by 5.7% y-o-y. The increase was driven largely by growth in comparable sales by 2.5% (3% in the US).  The earnings also beat consensus and was recorded at $2.27, higher than the $2.08 per share in the same period of 2018.

 

Home Depot reported $108.2 billion in Total Revenues in Fiscal year 2018.  The revenue comes from the sale of home improvement supplies like tools, construction products, and related services.

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We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Home Depot’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more Consumer Discretionary data.

 

Key Factors Affecting Earnings:

Revenue to grow:

  • The company has seen revenue fluctuating over the quarters. In-spite of the fluctuations, the company has seen a revenue growth in all quarters of FY 2018 vis-à-vis the same quarters of FY 2017. In Q1 2019 (ended April 2019) revenue was recorded at $26.4 billion, up 5.7% y-o-y
  • The company’s revenue growth is mainly contributed by the revenue per square foot metric. It has increased from $399 in 2016 to $456.60 in 2018. Trefis estimates the metric will reach $470.40 by 2019.
  • The number of stores and square footage per store metrics have remained nearly flat for a few years now and are expected to continue in the same manner in 2019.

Trend in Expenses:

  • Total Expenses have moved in tandem with Total Revenue over the quarters. Cost of Sales has been steady at around 66% of Total Revenue over the quarters. In Q1 2019 (ended April 2019) the metric stood at 65.8%
  • Indirect expenses decreased in FY 2018 and we expect the same to continue in FY 2019 as they are estimated at $8.7 billion.

Full Year Outlook:

  • For the full year, we expect gross revenue to increase by 3.2% to $111.6 billion in FY 2019.
  • EBITDA margin is expected to increase slightly to around 18.7%.

 

Trefis has a price estimate of $207 per share for Home Depot’s stock. The value is based on the expectations of improvement in comparable sales and EBITDA margin.

 

 

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