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Category: Stock Market and The Home Depot
Date: 19 November 2019 Stock Price: $227.04 We take a look at the 3rd quarter 2019 earnings report of the world's largest home improvement company, The Home Depot. Has the continued economic growth in the USA benefited the group?
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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 3rd quarter 2019 earnings report
The data refers to the latest quarter unless specified otherwise
- Net sales: $27.223 billion (up from $26.302 billion for the same quarter of the previous year)
- Net sales increased by 3.5% over the last 12 months
- Cost of sales: $17.836 billion (up from $17.151 billion for the same quarter of the previous year)
- Cost of sales increased by 4% over the last 12 months
- Net earnings: $2.769 billion (down 3.4% from $2.867 billion for the same quarter of the previous year)
- Diluted earnings per share: $2.53 (up 0.8% from $2.51 for the same quarter of the previous year)
- PE ratio of The Home Depot: 21.4
- PE ratio of The Home Depot: 21.4
- Diluted shares in issue: 1.094 billion (down 4.1% from 1.141 billion for the same quarter of the previous year)
- Cash and cash equivalents: $2.193 billion
- Cash and equivalents per share: $2
- Cash and equivalents makes up 0.88% of The Home Depot's market capital
- Cash and equivalents makes up 4.2% of The Home Depot's total assets
- Merchandise inventories:: $15.711 billion
- Home Depot merchandise inventories increased by 6.4% over the last 12 months
- Inventories makes up 30.04% of Home Depot's total assets
- Receivables: $2.231 billion
- Receivables makes up 4.3% of The Home Depot's total assets
- Home Depot receivables increased by 2.7% over the last 12 months
- Receivables makes up 4.3% of The Home Depot's total assets
- Customer transactions (in millions): 400.9
- Average ticket $66.36 up 1.9% from $ 65.11 for the same quarter of the previous year
- Sales per square foot: $449.17 up 3.5% from $433.99 for the same quarter of the previous year
The Home Depot management commentary on their 3rd quarter 2019 earnings
ATLANTA, Nov. 19, 2019 /PRNewswire/ -- The Home Depot®, the world's largest home improvement retailer, today reported third quarter fiscal 2019 sales of $27.2 billion, an increase of 3.5 percent, or $921 million, compared to the third quarter of fiscal 2018. Comparable sales for the third quarter of fiscal 2019 were positive 3.6 percent, and comparable sales in the U.S. were positive 3.8 percent
"Our third quarter results reflected broad-based growth across our business, yet sales were below our expectations driven by the timing of certain benefits associated with our One Home Depot strategic investments," said Craig Menear, chairman, CEO and president. "We are largely on track with these investments and have seen positive results, but some of the benefits anticipated for fiscal 2019 will take longer to realize than our initial assumptions. As a result, today we are updating our fiscal 2019 sales guidance, and we are reaffirming our fiscal 2019 earnings-per-share guidance. We are encouraged by the momentum in our business as we invest to extend our competitive advantages. I would like to thank our associates for their hard work and continued dedication to our customers."
"Our third quarter results reflected broad-based growth across our business, yet sales were below our expectations driven by the timing of certain benefits associated with our One Home Depot strategic investments," said Craig Menear, chairman, CEO and president. "We are largely on track with these investments and have seen positive results, but some of the benefits anticipated for fiscal 2019 will take longer to realize than our initial assumptions. As a result, today we are updating our fiscal 2019 sales guidance, and we are reaffirming our fiscal 2019 earnings-per-share guidance. We are encouraged by the momentum in our business as we invest to extend our competitive advantages. I would like to thank our associates for their hard work and continued dedication to our customers."
The Company updated its guidance for fiscal 2019, a 52-week year compared to fiscal 2018, a 53-week year. The Company expects its fiscal 2019 sales to grow by approximately 1.8 percent and comp sales for the comparable 52-week period to increase approximately 3.5 percent. This compares to the Company's prior fiscal 2019 sales growth guidance of 2.3 percent and comp sales growth of 4.0 percent. The Company reaffirmed its diluted earnings-per-share guidance for the year and expects diluted earnings-per-share growth of approximately 3.1 percent from fiscal 2018 to $10.03.
The Home Depot 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 $98.30 and its currently trading at $227.04. That's a very strong return of 131% 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 $239.31 than it is to its 52 week low of $158.09 which 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.
Recent coverage of The Home Depot
The extract below covers the latest regarding The Home Depot as obtained from TheStreet.com
Home Depot (HD - Get Report) in the Tuesday premarket reported another earnings beat but missed on sales. The stock closed Monday by testing its quarterly risky level at $237.72 with an all-time intraday high of $239.30. The Atlanta home-improvement giant's stock dipped to its semiannual pivot at $226.61 at the open Tuesday. From high to the morning low of $225.55, the stock dropped by 5.7%.
My call is to be patient and buy the stock on weakness to its annual value level at $207.32. If it rebounds, reduce holdings on strength to its quarterly risky level at $237.72. Monday's close before the earnings prompted technical warnings to sell the stock. The shares were testing a risky level, and its weekly slow stochastic reading was above 90 on a scale of 00 to 100, which I call an inflating parabolic bubble. Another warning is that this week will likely confirm a negative weekly key reversal. This happens when a stock sets its all-time high, then closes the week below the prior week's low, which is $230.18. Home Depot is a Dow Jones Industrial Average component and is not a cheap stock. The shares trade at a p/e multiple of 23.26, and the dividend yields 2.29%, according to Macrotrends.
Read the full article here
Home Depot (HD - Get Report) in the Tuesday premarket reported another earnings beat but missed on sales. The stock closed Monday by testing its quarterly risky level at $237.72 with an all-time intraday high of $239.30. The Atlanta home-improvement giant's stock dipped to its semiannual pivot at $226.61 at the open Tuesday. From high to the morning low of $225.55, the stock dropped by 5.7%.
My call is to be patient and buy the stock on weakness to its annual value level at $207.32. If it rebounds, reduce holdings on strength to its quarterly risky level at $237.72. Monday's close before the earnings prompted technical warnings to sell the stock. The shares were testing a risky level, and its weekly slow stochastic reading was above 90 on a scale of 00 to 100, which I call an inflating parabolic bubble. Another warning is that this week will likely confirm a negative weekly key reversal. This happens when a stock sets its all-time high, then closes the week below the prior week's low, which is $230.18. Home Depot is a Dow Jones Industrial Average component and is not a cheap stock. The shares trade at a p/e multiple of 23.26, and the dividend yields 2.29%, according to Macrotrends.
Read the full article here
The Home Depot (HD) latest stock valuation
So what is Home Depot stock worth based on their 3rd quarter 2019 earnings report and their earnings guidance provided? Based on their earnings report and the fiscal guidance provided our valuation model provides a target (full value) price for Home Depot at $208.50 a stock (down slightly from our 2nd quarter 2019 earnings report review of Home Depot). We therefore believe the stock of The Home Depot is overvalued
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 $208.50, thus a good entry point into The Home Depot would be at $187.7 or below.
We expect the stock of Home Depot to pull back slightly from current levels in coming weeks and months to levels closer to our target (full value) price.
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 $208.50, thus a good entry point into The Home Depot would be at $187.7 or below.
We expect the stock of Home Depot to pull back slightly from current levels in coming weeks and months to levels closer to our target (full value) price.
Next earnings release for The Home Depot
It is expected that The Home Depot will release their 4th quarter and full fiscal 2019 earnings report towards the end of February 2020