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Home Depot reports 3Q18 earnings beat, raises outlook

14 November 2018

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by Anchor

The Home Depot reported 3Q18 results on Tuesday (13 November), which showed that its revenue stood at $26.3bn (up c. 5% YoY) vs $25.0bn posted in 3Q17, while diluted EPS came in at $2.51 (+36.4% YoY) compared with the $1.84 recorded in the same period of 2017. Both were ahead of the Refinitiv consensus analyst estimates of $2.26 in EPS and $26.26bn in revenue. Same-store sales (for stores open at least 12 months) rose by 4.8% YoY globally vs expected growth of 4.7% YoY. Home Depot said sales per square foot jumped 5.2% YoY, while customer transactions advanced by 1.4% YoY, and the average shopper’s ticket was up 3.6% YoY. On its earnings call, Home Depot highlighted that big-ticket sales (those transactions over $1,000 that represent c. 20% of its US sales), surged by 9.1% YoY.

Despite the good results, on the conference call management warned that the company will face tougher comparisons in the foreseeable future because of the devastating storms late last year. In 4Q18, Home Depot will be comparing against c. $380mn in hurricane sales booked during 4Q17, according to CFO Carol Tome. The largest US home improvement chain also suggested that the pace of US home sales was indeed slowing and indicated that impending trade tariffs could force it to raise prices on some of its products.According to Reuters, this warning overshadowed the firm’s stronger-than-expected 3Q18 results and higher annual sales forecast – the share price fell c. 4% on Tuesday morning, but recovered most of the losses to trade only marginally down later in the session (a 0.31% loss on the day).

Looking ahead to FY18, Home Depot said that it now expects sales to grow by c. 7.2% YoY, up from its previous outlook of 7% YoY growth. The firm said that same-store sales should be up 5.5% YoY – vs a previous forecast of 5.3% YoY growth. Home Depot also now expects to complete c. $8bn in share repurchases for the year, up from initial plans for $6bn.

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