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Category: Stock Market and HD Supply
Date: 10 September 2019 Stock Price: $40.82 We take a look at the 2nd quarter earnings release of their 2019 fiscal year of HD supply one of the leaders of construction supplies in North America
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About HD Supply
HD Supply’s two leading businesses units – HD SUPPLY FACILITIES MAINTENANCE and HD SUPPLY CONSTRUCTION & INDUSTRIAL – have more than 80 years of experience supporting our customers with leadership positions in the maintenance, repair and operations (MRO) and residential, non-residential and specialty construction sectors. With 270 branches and 44 distribution centers spread across 36 states and six Canadian provinces, HD Supply provides an expansive offering of approximately 800,000 SKUs featuring high-quality, name-brand and proprietary products – all at competitive prices.
Financial overview of HD Supply's latest earnings report
The numbers we are interested in (for the quarter):
- Net sales $1.64 billion (up from $1.6 billion from the same quarter of the previous year)
- Cost of sales: $991 million (up from $978 million for the same quarter of the previous year)
- Net income: $135 million (down from from $131 million for the same quarter of the previous year)
- Diluted earnings per share: $0.79 (up from $0.71 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 170.057 million (down from 183.822 million for the same quarter of the previous year)
- PE ratio: 10.4 (based on the earnings per share for the current quarter being reported for full fiscal year)
- Cash and cash equivalents: $41 million
- Cash and cash equivalents per share: $0.24
- Cash and cash equivalents makes up 0.59% of HD Supply's current market capital
- Cash and cash equivalents makes up 0.86% of HD Supply's total assets
- Inventories: $821 million (up from $766 million for the same quarter of the previous year)
- Inventories makes up 17.2% of HD Supply's total assets
- Inventories increased by 7.18% over the last year
- Accounts receivable: $860 million (up from $732 million for the same quarter of the previous year)
- Accounts receivable makes up 18.08% of HD Supply's total assets
- Accounts receivable grew by 17.48% over the last year
- Total shareholders' equity of HD Supply': $1.43 billion
- Shareholders' equity per share: $8.41
- So HD Supply is trading at 4.85 times the stockholders equity per share
- So HD Supply is trading at 4.85 times the stockholders equity per share
HD Supply's management commentary on the results and earnings guidance
ATLANTA, Sept. 10, 2019 (GLOBE NEWSWIRE) -- HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest industrial distributors in North America, today reported Net sales of $1.6 billion for the second quarter of fiscal 2019 ended August 4, 2019, an increase of $24 million, or 1.5 percent, as compared to the second quarter of fiscal 2018.
“Despite a difficult start to 2019, I am proud of our more than 11,500 HD Supply associates who continue to provide exceptional service to our customers,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We remain confident in our ability to create value by focusing on what we can control, providing the best customer service in the industry, generating strong free cash flow and executing on our capital allocation strategy.”
Gross profit increased $11 million, or 1.8 percent, to $633 million for the second quarter of fiscal 2019, as compared to $622 million for the second quarter of fiscal 2018. Gross profit was 39.0 percent of Net sales for the second quarter of fiscal 2019, up approximately 10 basis points from 38.9 percent for the second quarter of fiscal 2018.
Operating income of $211 million was flat as compared to the second quarter of fiscal 2018. Operating income was 13.0 percent of Net sales for the second quarter of fiscal 2019, down approximately 20 basis points from 13.2 percent for the second quarter of fiscal 2018.
Net income increased $4 million, or 3.1 percent, to $135 million for the second quarter of fiscal 2019, as compared to $131 million for the second quarter of fiscal 2018. Net income per diluted share increased $0.08, or 11.3 percent, to $0.79 in the second quarter of fiscal 2019, as compared to $0.71 in the second quarter of fiscal 2018.
Adjusted EBITDA decreased $2 million, or 0.8 percent, to $244 million for the second quarter of fiscal 2019, as compared to $246 million for the second quarter of fiscal 2018. Adjusted EBITDA was 15.0 percent of Net sales for the second quarter of fiscal 2019, down approximately 40 basis points from 15.4 percent for the second quarter of fiscal 2018.
Adjusted net income increased $1 million, or 0.5 percent, to $183 million for the second quarter of fiscal 2019, as compared to $182 million for the second quarter of fiscal 2018. Adjusted net income per diluted share increased $0.09, or 9.1 percent, to $1.08 in the second quarter of fiscal 2019, as compared to $0.99 in the second quarter of fiscal 2018.
As of August 4, 2019, HD Supply’s combined liquidity of $730 million was comprised of $41 million in cash and cash equivalents and $689 million of additional available borrowings (excluding $5 million of borrowings on available cash balances) under HD Supply, Inc.'s senior asset-based lending facility, based on qualifying inventory and receivables
Third-Quarter 2019 and Fiscal Year 2019 Outlook
For the third quarter of fiscal 2019 and full-year fiscal 2019, the Company anticipates the following (amounts in millions, except per share data):
“Despite a difficult start to 2019, I am proud of our more than 11,500 HD Supply associates who continue to provide exceptional service to our customers,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We remain confident in our ability to create value by focusing on what we can control, providing the best customer service in the industry, generating strong free cash flow and executing on our capital allocation strategy.”
Gross profit increased $11 million, or 1.8 percent, to $633 million for the second quarter of fiscal 2019, as compared to $622 million for the second quarter of fiscal 2018. Gross profit was 39.0 percent of Net sales for the second quarter of fiscal 2019, up approximately 10 basis points from 38.9 percent for the second quarter of fiscal 2018.
Operating income of $211 million was flat as compared to the second quarter of fiscal 2018. Operating income was 13.0 percent of Net sales for the second quarter of fiscal 2019, down approximately 20 basis points from 13.2 percent for the second quarter of fiscal 2018.
Net income increased $4 million, or 3.1 percent, to $135 million for the second quarter of fiscal 2019, as compared to $131 million for the second quarter of fiscal 2018. Net income per diluted share increased $0.08, or 11.3 percent, to $0.79 in the second quarter of fiscal 2019, as compared to $0.71 in the second quarter of fiscal 2018.
Adjusted EBITDA decreased $2 million, or 0.8 percent, to $244 million for the second quarter of fiscal 2019, as compared to $246 million for the second quarter of fiscal 2018. Adjusted EBITDA was 15.0 percent of Net sales for the second quarter of fiscal 2019, down approximately 40 basis points from 15.4 percent for the second quarter of fiscal 2018.
Adjusted net income increased $1 million, or 0.5 percent, to $183 million for the second quarter of fiscal 2019, as compared to $182 million for the second quarter of fiscal 2018. Adjusted net income per diluted share increased $0.09, or 9.1 percent, to $1.08 in the second quarter of fiscal 2019, as compared to $0.99 in the second quarter of fiscal 2018.
As of August 4, 2019, HD Supply’s combined liquidity of $730 million was comprised of $41 million in cash and cash equivalents and $689 million of additional available borrowings (excluding $5 million of borrowings on available cash balances) under HD Supply, Inc.'s senior asset-based lending facility, based on qualifying inventory and receivables
Third-Quarter 2019 and Fiscal Year 2019 Outlook
For the third quarter of fiscal 2019 and full-year fiscal 2019, the Company anticipates the following (amounts in millions, except per share data):
HD Supply (NASDAQ: HDS) stock price history
The image below shows the stock price history of HD Supply over the last 5 years. Its been a decent time for HD Supply stockholders. While the stock has not shot the lights out in the last 5 years it has given stockholders a recent return over the lat 5 years. 5 years ago the stock was trading at$27 and its currently trading at $40.82, so that's 51% return over the last 5 years. Interestingly the stock is trading at closer to its 52 week low of $35.35 than it is to its 52 week high of $47.13 showing that short term sentiment and momentum towards HD Supply is largely negative.
HD Supply (NASDAQ: HDS) latest stock valuation
So what are HD Supply stock worth after the release of their latest earnings report? Based on HDS' latest earnings report and their fiscal guidance provided for their full fiscal 2019, our valuation models provide a target (full value) price of $45.20 a stock. We therefore feel the stock is slightly undervalued at its current price, and we see a price at least 10% below our target price as good buy, and that is the level the stock is currently trading at. A slowing US economy might affect the group's future earnings, but our valuation and target price is based on the low end of the group's fiscal guidance provided.