Shares of The Home Depot (HD- Free Home Depot Stock Report) were little changed after the world's largest home-improvement retailer released decent fiscal first-quarter (ended May 5th) financial results. Sales in the three-month period increased 5.7% from a year earlier, to $26.381 billion, nearly matching our $26.400 billion target. That said, comparable-store sales growth of 2.5% was below consensus analyst estimates of 4.2%. Inclement weather and an extra week in the previous year weighed on the retailer's same-store sales. Customers did spend more during the quarter, with the average transaction climbing 2%. All told, for the quarter, Home Depot achieved share profits of $2.27, $0.12 better than our estimate and 9% higher than the previous year's tally.
Looking ahead, the rest of fiscal 2019 may be a bit of an uphill climb for the retailer. Management's latest full-year guidance calls for sales to rise approximately 3.3% and for earnings to reach $10.03 per share. Leadership mentioned that ``shoppers are far from being in the doldrums, but the prevailing attitude now is more cautious and careful.'' Thus, although the May quarterly profit beat our estimate, we are not adjusting our full-year call, which remains at $10.05 a share. This would represent a year-over-year increase of less than 2%.
As for the stock, we think it still holds some appeal, particularly for conservative investors. It offers a number of defensive properties, including our top rank for Safety and perfect scores (100 out of 100) for Earnings Predictability and Price Growth Persistence. A near-3% dividend yield is another plus. In our view, HD will provide worthwhile risk-adjusted returns out to the 2022-2024 time frame.
About the Company: The Home Depot, Inc. operates a chain of 2,286 retail building supply/home improvement “warehouse” stores across the United States, Canada, and Mexico. The company's average store size is around 104,000 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.