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The Home Depot (HD Free Home Depot Stock Report), the world's largest home-improvement retailer and a component of the Dow 30, has reported strong fiscal third-quarter (ended October 28th) results. The company earned $0.74 a share in the interim (note that this figure excludes a charge of $0.11 related to the previously announced closing of seven stores in China), a nickel ahead of our forecast and up 23% from the year-earlier period. The retailer beat on the top line, as well. Sales came in at $18.1 billion, versus our forecast of $17.8 billion, and comparable-store sales rose 4.2% (up 4.3% in the United States). Investors cheered the report, and HD stock rose notably in morning trading on the news.

The solid third-quarter showing was due to a number of factors, including the nascent recovery in the housing market. While this segment of the economy still has some issues to work though, such as the availability of financing, it is starting to benefit the company, rather than acting as an anchor. Meanwhile, demand for maintenance and repair and home decor items remained strong. All told, customer transactions climbed 1.7%, while the average ticket rose 2.9%, to $54.55 (due in part to commodity-cost inflation).

Management's ongoing efforts to improve the supply chain and distribution, cut costs, and offer top-tier customer service appeared to help, as well. To wit, the gross margin expanded slightly and total operating expenses, as a percentage of sales, ticked lower. Lower interest expenses and a reduced share count helped buoy share net, as well. We believe that The Home Depot continued to win market share from rival Lowe's (LOW). However, we will have to wait until next week to get October-period results from the world's number two home improvement retailer.

We look for The Home Depot to finish strong in fiscal 2012. Gradual recovery in the housing market ought to help, as should sales of seasonal goods, maintenance and repair items, and recovery in large-ticket products like appliances, floorings, and kitchens. All told, management now looks for full-year fiscal 2012 sales and adjusted share earnings to be approximately $74.055 billion (up 5.2%) and $3.03. It is important to note, however, that these figures do not include any benefit from rebuilding efforts on the East Coast in the wake of Hurricane Sandy. While we certainly expect the company to get a boost in sales, it is extremely hard to gauge the impact, as the extent of the damage is still not fully known and the onset of winter could slow recovery efforts. Management guesstimated that the benefit to sales could be comparable to last year's Hurricane Irene, which was roughly a $360 million. At this point, we are looking for the company to earn $0.65 a share in the January term, which would bring the full-year tally to $3.05. However, we believe that there is more upside than downside to these figures due to the impact of Hurricane Sandy.

We continue to like these shares for a variety of investors. We think near-term prospects are bright, given the evolving recovery in the housing and employment markets. We also like the stock's decent dividend yield and the fact that payments are well covered. Additionally, the company garners our Highest score for Financial Strength, while the stock gets a top mark for Safety and carries a Beta below 1.00.

About the Company:The Home Depot, Inc. operates a chain of 2,250 retail building supply/home improvement “warehouse” stores across the United States, Canada, and Mexico. The company's average store size is around 105,000 square feet indoor, plus 24,000 additional square feet in its garden centers. The Home Depot's product lines include building materials, lumber, floor/wall coverings, plumbing, heating, electrical, paint and furniture, seasonal and specialty items, and hardware and tools.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.