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Category: Stock Market and The Home Depot
Date: 18 November 2020 Stock Price of Home Depot (HD) : $272.47 We take a look at the 3rd 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 net sales of $33.5 billion up 23.2% on the same quarter of the previous year and net income of $3.43 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 3rd quarter 2020 earnings report
The data refers to the latest quarter unless specified otherwise
- Net sales: $33.536 billion (up from $27.223 billion for the same quarter of the previous year)
- Net sales increased by 23.2% over the last 12 months
- Cost of sales: $22.088 billion (up from $17.836 billion for the same quarter of the previous year)
- Cost of sales increased by 23.8% 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: $3.432billion (up 23.9% from $2.769 billion for the same quarter of the previous year)
- Diluted earnings per share: $3.18 (up 25.7% from $2.53 for the same quarter of the previous year)
- PE ratio of The Home Depot: 21.9
- Dividend declared: $1.50
- Dividend yield of The Home Depot: 2.2%
- Diluted shares in issue: 1.073 billion (down -1.5% from 1.094 billion for the same quarter of the previous year)
- Cash and cash equivalents: $14.652 billion
- Cash and equivalents per share: $13.65
- Cash and equivalents makes up 5% of The Home Depot's market capital
- Cash and equivalents makes up 21.8% of The Home Depot's total assets
- Merchandise inventories: $16.155 billion
- Inventories makes up 24.1% of Home Depot's total assets
- Receivables: $2.666 billion
- Receivables makes up 3.9% of The Home Depot's total assets
- Cash generated from operations for the 9 months: $17.415 billion
- Cash generated from operations per share for the 9 months: $16.62
- Customer transactions (in millions): 453.2 (up 15% from the 400.9 million transactions for the same quarter of the previous year)
- Average ticket $72.98 (up 10% from $66.36 for the same quarter of the previous year)
- Sales per square foot: $552.85 (up 23.1% from $499.17 for the same quarter of the previous year)
The Home Depot management commentary on their 3rd quarter 2020 earnings
ATLANTA, Nov. 17, 2020 /PRNewswire/ -- The Home Depot®, the world's largest home improvement retailer, today reported sales of $33.5 billion for the third quarter of fiscal 2020, an increase of $6.3 billion, or 23.2 percent from the third quarter of fiscal 2019. Comparable sales for the third quarter of fiscal 2020 were positive 24.1 percent, and comparable sales in the U.S. were positive 24.6 percent.
Net earnings for the third quarter of fiscal 2020 were $3.4 billion, or $3.18 per diluted share, compared with net earnings of $2.8 billion, or $2.53 per diluted share, in the same period of fiscal 2019. For the third quarter of fiscal 2020, diluted earnings per share increased 25.7 percent from the same period in the prior year.
"The third quarter was another exceptional quarter for The Home Depot as we saw the continuation of outsized demand for home improvement projects, which has led to sales growth of more than $15 billion through the first nine months of the year," said Craig Menear, chairman and CEO. "Our ability to effectively adapt to this high-demand environment is a testament to both the investments we have made in the business as well as our associates' focus on customers. We continue to lean into these investments because we believe they are critical in enabling market share growth in any economic environment. I am proud of the resilience and strength our associates have continued to demonstrate, and I would like to thank them and our supplier partners," said Menear.
Net earnings for the third quarter of fiscal 2020 were $3.4 billion, or $3.18 per diluted share, compared with net earnings of $2.8 billion, or $2.53 per diluted share, in the same period of fiscal 2019. For the third quarter of fiscal 2020, diluted earnings per share increased 25.7 percent from the same period in the prior year.
"The third quarter was another exceptional quarter for The Home Depot as we saw the continuation of outsized demand for home improvement projects, which has led to sales growth of more than $15 billion through the first nine months of the year," said Craig Menear, chairman and CEO. "Our ability to effectively adapt to this high-demand environment is a testament to both the investments we have made in the business as well as our associates' focus on customers. We continue to lean into these investments because we believe they are critical in enabling market share growth in any economic environment. I am proud of the resilience and strength our associates have continued to demonstrate, and I would like to thank them and our supplier partners," said Menear.
Investment in Associates
Throughout the COVID-19 pandemic, The Home Depot has taken significant actions to support associates, including expanded paid time off for all hourly associates to use at their discretion and the implementation of a temporary weekly bonus program. The Company is now transitioning from these temporary programs to invest in permanent compensation enhancements for frontline, hourly associates. This will result in approximately $1 billion of incremental compensation on an annualized basis.
At the end of the third quarter, the Company operated a total of 2,295 retail stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index.
Throughout the COVID-19 pandemic, The Home Depot has taken significant actions to support associates, including expanded paid time off for all hourly associates to use at their discretion and the implementation of a temporary weekly bonus program. The Company is now transitioning from these temporary programs to invest in permanent compensation enhancements for frontline, hourly associates. This will result in approximately $1 billion of incremental compensation on an annualized basis.
At the end of the third quarter, the Company operated a total of 2,295 retail stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index.
The Home Depot ( HD) stock price history on chart over the last 5 years
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 $130 and its currently trading at $272. That's a very strong return of 109% 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 than it is to its 52 week low 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.
The stock of Home Depot is trading at a lot closer to its 52 week high than it is to its 52 week low 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.
The Home Depot (HD) stock price vs Lowes (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 Lowes has narrowly outperformed that of bigger rival The Home Depot
- Lowe's (LOW): 111.3%
- The Home Depot (HD): 109%
Over the 5 year period the stock of Lowes has narrowly outperformed that of bigger rival The Home Depot
Recent coverage of The Home Depot
The extract below covers the latest regarding The Home Depot as obtained from Investors.com
Home Depot (HD) reported better-than-expected third quarter earnings early Tuesday, with blowout same-store sales as the coronavirus pandemic spurs a home improvement boom. But Home Depot stock fell.
On Monday, the Dow Jones giant agreed to reunite with former subsidiary HD Supply (HDS) in an $8.7 billion deal.
Home Depot Earnings
Estimates: Analysts expected Home Depot earnings per share of $3.08, a 22% increase from the year-ago quarter, according to Zacks Investment Research. They saw revenue climbing 17% to $31.9 billion. Same-store sales were expected to surge 17.4% with U.S. comps up 19.3%, according to Consensus Metrix.
Results: Home Depot earnings jumped to $3.18 a share, with revenue up 23% to $33.54 billion. Same-store sales leapt 24.1%, with U.S. comps up 24.6%. The number of transactions grew 13% to 453.2 million, and the average ticket price increased 10% to $72.98. The Dow Jones retail giant says it'll spend $1 billion on permanently higher compensation for its frontline, hourly workers.
Home renovations have been booming during the pandemic. Record-low borrowing rates have fueled spending on DIY projects as well as larger remodels. As a result, home-improvement supplies stores like Home Depot have seen sales rise, even during the pandemic. In fact, stay-at-home orders have launched a nesting trend that's boosting spending, more recently on holiday decorating.
Read the full article here
Home Depot (HD) reported better-than-expected third quarter earnings early Tuesday, with blowout same-store sales as the coronavirus pandemic spurs a home improvement boom. But Home Depot stock fell.
On Monday, the Dow Jones giant agreed to reunite with former subsidiary HD Supply (HDS) in an $8.7 billion deal.
Home Depot Earnings
Estimates: Analysts expected Home Depot earnings per share of $3.08, a 22% increase from the year-ago quarter, according to Zacks Investment Research. They saw revenue climbing 17% to $31.9 billion. Same-store sales were expected to surge 17.4% with U.S. comps up 19.3%, according to Consensus Metrix.
Results: Home Depot earnings jumped to $3.18 a share, with revenue up 23% to $33.54 billion. Same-store sales leapt 24.1%, with U.S. comps up 24.6%. The number of transactions grew 13% to 453.2 million, and the average ticket price increased 10% to $72.98. The Dow Jones retail giant says it'll spend $1 billion on permanently higher compensation for its frontline, hourly workers.
Home renovations have been booming during the pandemic. Record-low borrowing rates have fueled spending on DIY projects as well as larger remodels. As a result, home-improvement supplies stores like Home Depot have seen sales rise, even during the pandemic. In fact, stay-at-home orders have launched a nesting trend that's boosting spending, more recently on holiday decorating.
Read the full article here
The Home Depot (HD) latest stock valuation
So what is Home Depot stock worth based on their 3rd quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Home Depot at $204.80 a stock (up very slightly from our 2nd quarter 2020 earnings report review of Home Depot).
We therefore believe the stock of The Home Depot is overvalued at its current price of $272
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $204.80, thus a good entry point into The Home Depot would be at $184.30 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 $272
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $204.80, thus a good entry point into The Home Depot would be at $184.30 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 4th quarter 2020 earnings report towards the end of February 2021