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Category: Stock Market and The Home Depot
Date: 19 August 2020 Home Depot (HD) Stock Price: $285.00 We take a look at the 2nd quarter 2020 earnings report of the world's largest home improvement company, The Home Depot. The Company employs more than 400,000 associates. For the quarter the company reported revenue of $38.1 billion up 23.4% on the same quarter of the previous year and net income of $4.332 billion.
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The investments we have made across the business have significantly increased our agility, allowing us to respond quickly to changes while continuing to promote a safe operating environment. This enhanced our team's ability to work cross-functionally to better serve our customers and deliver record-breaking sales in the quarter -Craig Menear, chairman, CEO and president. "
About The Home Depot
When The Home Depot was founded in 1978, Bernie Marcus and Arthur Blank had no idea how revolutionary this new “hardware store” would be for home improvement and the retail industry.Today, we’re proud to be the world’s largest home improvement retailer. In more than 2,200 stores across North America, we aspire to excel in service – to our customers, associates, communities and shareholders. That’s what leadership means to us. That's The Home Depot difference. Our founders’ vision of one-stop shopping for the do-it-yourselfer came to fruition when they opened the first two Home Depot stores on June 22, 1979, in Atlanta, Georgia. The first stores, at around 60,000 square feet each, were cavernous warehouses that dwarfed the competition and stocked 25,000 products, much more than the average hardware store at that time.
Today, The Home Depot is the world’s largest home improvement retailer with nearly 400,000 orange-blooded associates and more than 2,200 stores in the U.S., Canada and Mexico. The typical store today averages 105,000 square feet of indoor retail space, interconnected with an e-commerce business that offers more than one million products for the DIY customer, professional contractors, and the industry’s largest installation business for the Do-It-For-Me customer.
Today, The Home Depot is the world’s largest home improvement retailer with nearly 400,000 orange-blooded associates and more than 2,200 stores in the U.S., Canada and Mexico. The typical store today averages 105,000 square feet of indoor retail space, interconnected with an e-commerce business that offers more than one million products for the DIY customer, professional contractors, and the industry’s largest installation business for the Do-It-For-Me customer.
Overview of The Home Depot's 2nd quarter 2020 earnings report
The data refers to the latest quarter unless specified otherwise
- Net sales: $38.054 billion (up from $30.839 billion for the same quarter of the previous year)
- Net sales increased by 23.4% over the last 12 months
- Cost of sales: $25.112 billion (up from $20.407 billion for the same quarter of the previous year)
- Cost of sales increased by 23.1% over the last 12 months
- Some margin gain for The Home Depot as their revenues increased at a faster rate than their cost of sales
- Net earnings: $4.332 billion (up 24.5% from $3.479 billion for the same quarter of the previous year)
- Diluted earnings per share: $4.02 (up 26.8% from $3.17 for the same quarter of the previous year)
- PE ratio of The Home Depot: 23.3%
- Dividend declared: $1.50
- Dividend yield of The Home Depot: 2.1%
- Diluted shares in issue: 1.077 billion (down -2.1% from 1.099 billion for the same quarter of the previous year)
- Cash and cash equivalents: $14.139 billion
- Cash and equivalents per share: $13.12
- Cash and equivalents makes up 4.6% of The Home Depot's market capital
- Cash and equivalents makes up 22.3% of The Home Depot's total assets
- Merchandise inventories: $13.498 billion
- Inventories makes up 21.3% of Home Depot's total assets
- Receivables: $2.562 billion
- Receivables makes up 4% of The Home Depot's total assets
- Cash generated from operations; $14.829billion
- Cash generated from operations per share; $13.76
- Customer transactions (in millions): 511.5 (up 12.3% from the 455.5 million transactions for the same quarter of the previous year)
- Average ticket $74.12 (up 10% from $67.31 for the same quarter of the previous year)
- Sales per square foot: $629.38 (up 23.5% from $509.55 for the same quarter of the previous year)
The Home Depot management commentary on their 2nd quarter 2020 earnings
ATLANTA, Aug. 18, 2020 /PRNewswire/ -- The Home Depot®, the world's largest home improvement retailer, today reported sales of $38.1 billion for the second quarter of fiscal 2020, a 23.4 percent increase from the second quarter of fiscal 2019. Comparable sales for the second quarter of fiscal 2020 were positive 23.4 percent, and comparable sales in the U.S. were positive 25.0 percent.
Net earnings for the second quarter of fiscal 2020 were $4.3 billion, or $4.02 per diluted share, compared with net earnings of $3.5 billion, or $3.17 per diluted share, in the same period of fiscal 2019. For the second quarter of fiscal 2020, diluted earnings per share increased 26.8 percent from the same period in the prior year.
"The investments we have made across the business have significantly increased our agility, allowing us to respond quickly to changes while continuing to promote a safe operating environment. This enhanced our team's ability to work cross-functionally to better serve our customers and deliver record-breaking sales in the quarter," said Craig Menear, chairman, CEO and president. "We remain focused on continuing the momentum of our One Home Depot investment strategy that we believe will position us for continued growth over the long-term, while at the same time maintaining flexibility to navigate the demands of the current environment. Through it all, we will continue to lead with our values by doing the right thing and taking care of our people."
Net earnings for the second quarter of fiscal 2020 were $4.3 billion, or $4.02 per diluted share, compared with net earnings of $3.5 billion, or $3.17 per diluted share, in the same period of fiscal 2019. For the second quarter of fiscal 2020, diluted earnings per share increased 26.8 percent from the same period in the prior year.
"The investments we have made across the business have significantly increased our agility, allowing us to respond quickly to changes while continuing to promote a safe operating environment. This enhanced our team's ability to work cross-functionally to better serve our customers and deliver record-breaking sales in the quarter," said Craig Menear, chairman, CEO and president. "We remain focused on continuing the momentum of our One Home Depot investment strategy that we believe will position us for continued growth over the long-term, while at the same time maintaining flexibility to navigate the demands of the current environment. Through it all, we will continue to lead with our values by doing the right thing and taking care of our people."
In the second quarter, the Company invested approximately $480 million in additional benefits for associates, including weekly bonuses for hourly associates in stores and distribution centers. Year-to-date, the Company has spent approximately $1.3 billion on enhanced pay and benefits in response to COVID-19. Additionally, the Company's first half performance resulted in a record payout for Success Sharing, the Company's profit-sharing program for hourly associates.
"I want to thank our associates for their continued focus on serving our customers and communities as we navigate these extraordinary circumstances together," said Menear.
Dividend Declaration
The Company today announced that its board of directors declared a second quarter cash dividend of $1.50 per share. The dividend is payable on September 17, 2020, to shareholders of record on the close of business on September 3, 2020. This is the 134th consecutive quarter the Company has paid a cash dividend.
"I want to thank our associates for their continued focus on serving our customers and communities as we navigate these extraordinary circumstances together," said Menear.
Dividend Declaration
The Company today announced that its board of directors declared a second quarter cash dividend of $1.50 per share. The dividend is payable on September 17, 2020, to shareholders of record on the close of business on September 3, 2020. This is the 134th consecutive quarter the Company has paid a cash dividend.
The Home Depot (NYSE: HD) stock price history
The image below, obtained from Google shows the stock price history of The Home Depot (NYSE:HD) for the last 5 years and it's been a pretty good time for Home Depot stockholders over the last 5 years. 5 years ago the stock was trading at $116 and its currently trading at $285. That's a very strong return of 148.4% provided to Home Depot stockholders over the last 5 years.
The stock of Home Depot is trading at a lot closer to its 52 week high of $290.58 than it is to its 52 week low of $140.63which to us is a clear indication that the short term sentiment and momentum of The Home Depot stock is very positive at this point in time.
The stock of Home Depot is trading at a lot closer to its 52 week high of $290.58 than it is to its 52 week low of $140.63which to us is a clear indication that the short term sentiment and momentum of The Home Depot stock is very positive at this point in time.
The Home Depot (NYSE: HD) stock price vs Lowes (NYSE: LOW) stock price over last 5 years
The image below shows the stock price performance of The Home Depot (HD) and Lowes (LOW) over the last 5 years. And over the 5 year period the stock price trends of the two home improvement giants have been fairly similar. The summary below shows the stock price returns provided by each over the last 5 years, sorted from best to worst performer:
Over the 5 year period the stock of The Home Depot has narrowly outperformed that of smaller rival, Lowe's
- The Home Depot (HD): 148.4%
- Lowe's (LOW): 131.7%
Over the 5 year period the stock of The Home Depot has narrowly outperformed that of smaller rival, Lowe's
Recent coverage of The Home Depot
The extract below covers the latest regarding The Home Depot as obtained from Investors.com
Home improvement retailer Home Depot (HD) easily beat second-quarter forecasts early Tuesday, as consumers invested more in their homes amid Covid-19 lockdowns. HD stock reversed lower on doubts Q2 trends will continue.
Home Depot Earnings Estimates: Wall Street expected Home Depot earnings per share to rise 17% to $3.71, according to Zacks Investment Research. Revenue for the Dow Jones component was expected to swell 12% to $34.42 billion. Overall same store sales were seen rising 11.4%, according to Consensus Metrix. But at U.S. stores they were seen rising a more muscular 17%.
Results: Home Depot earnings per share rose to $4.02 a share with revenue up 23% to $38.05 billion. Same-store sales surged 23.4%, with U.S. comps up 25%. Sales of big-ticket items like appliances and patio furnishings helped lift Home Depot earnings as did a surge in online sales.
But management cautioned that Q2 trends won't necessarily continue through the rest of the year. For now, the first two weeks of Q3 showed the prior quarter's sales trends held up. Fellow retail giant Walmart (WMT) also crushed Q2 views Tuesday but said sales have since "normalized" after consumers spent government stimulus funds.
Read the full article here
Home improvement retailer Home Depot (HD) easily beat second-quarter forecasts early Tuesday, as consumers invested more in their homes amid Covid-19 lockdowns. HD stock reversed lower on doubts Q2 trends will continue.
Home Depot Earnings Estimates: Wall Street expected Home Depot earnings per share to rise 17% to $3.71, according to Zacks Investment Research. Revenue for the Dow Jones component was expected to swell 12% to $34.42 billion. Overall same store sales were seen rising 11.4%, according to Consensus Metrix. But at U.S. stores they were seen rising a more muscular 17%.
Results: Home Depot earnings per share rose to $4.02 a share with revenue up 23% to $38.05 billion. Same-store sales surged 23.4%, with U.S. comps up 25%. Sales of big-ticket items like appliances and patio furnishings helped lift Home Depot earnings as did a surge in online sales.
But management cautioned that Q2 trends won't necessarily continue through the rest of the year. For now, the first two weeks of Q3 showed the prior quarter's sales trends held up. Fellow retail giant Walmart (WMT) also crushed Q2 views Tuesday but said sales have since "normalized" after consumers spent government stimulus funds.
Read the full article here
The Home Depot (HD) latest stock valuation
So what is Home Depot stock worth based on their 2nd quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Home Depot at $203.70 a stock (up from our 1st quarter 2020 earnings report review of Home Depot).
We therefore believe the stock of The Home Depot is overvalued at its current price of $285
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price, which in this case is $203.70, thus a good entry point into The Home Depot would be at $183.30 or below.
We expect the stock of Home Depot to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued and has been for some time and we believe once the spending of stimulus checks at stores such as the Home Depot and Walmart fades their reported earnings and stock prices will decline to reflect these lower sales.
We therefore believe the stock of The Home Depot is overvalued at its current price of $285
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price, which in this case is $203.70, thus a good entry point into The Home Depot would be at $183.30 or below.
We expect the stock of Home Depot to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued and has been for some time and we believe once the spending of stimulus checks at stores such as the Home Depot and Walmart fades their reported earnings and stock prices will decline to reflect these lower sales.
Next earnings release for The Home Depot
It is expected that The Home Depot will release their 3rd quarter 2020 earnings report towards the end of November 2020