Home Depot (HD) Q3 2019 Earnings Prep

in EARNINGS/INVESTING IDEAS by

The Home Depot, Inc. (NYSE:HD) is a large-cap stock with a market capitalization of $261.6 billion and a total enterprise value of $293.5 billion. The company operates in the Consumer Discretionary sector and Specialty Retail industry.

Home Depot is scheduled to report Q3 earnings results on November 19, 2019. The company is expected to report earnings of $2.53/share on revenue of $27.5 billion.

The consensus earnings per share (EPS) of $2.53/share is based on a poll of 29 analysts and represents a growth of 0.8% over the same quarter last year when the company reported earnings of $2.51/share. The revenue forecast of $27.528 billion based on a poll of 26 analysts implies a year-over-year (YoY) growth of 4.7%. Last year the company reported $26.302 billion in revenue for the quarter.

Expected to report EPS growth of $0.02/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $27,527.58 $26,302.00 4.7%
EPS $2.53 $2.51 0.8%

Home Depot has consistently managed to grow top-line while maintaining or improving net profit margins:

Home Depot Revenue Profit Margin

Source: Finbox

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $3.08 $3.17 2.9% Beat
Q1, 2020 $2.19 $2.27 3.9% Beat
Q4, 2019 $2.16 $2.25 4.2% Beat
Q3, 2019 $2.28 $2.51 10.1% Beat
Q2, 2019 $2.85 $3.05 7.0% Beat
Q1, 2019 $2.05 $2.08 1.5% Beat
Q4, 2018 $1.63 $1.69 3.7% Beat
Q3, 2018 $1.82 $1.84 1.1% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending August 4, 2019, the stock price reacted by increasing by 6.0%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-20 $207.95 $220.40 6.0% Increase
2019-05-21 $190.95 $188.91 -1.1% Decline
2019-02-26 $189.98 $183.67 -3.3% Decline
2018-11-13 $179.43 $179.90 0.3% Increase

Fundamentals And Technical Analysis

Home Depot is currently trading at $238.85/share, up 0.7% for the day. The company is trading at approximately 99.9% of its 52-week high of $238.99/share. The company’s stock price is up 14.9% since the last earnings report and up 1.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 56.96 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 23.1x and a forward P/E multiple of 23.3x. Home Depot’s current share price also implies a price-to-book (P/B) multiple of -223.3x. The following table summarizes some other key fundamental ratios:

Data as of November 18, 2019
Metric Value
Last Fiscal Period FY2020.Q2
Period End Date August 4, 2019
Stock Price (Current) $238.85
P/E Ratio 23.1x
P/E Ratio (Fwd) 23.3x
PEG Ratio 4.1
Total Debt to Capital (%) 11.7%
Levered Free Cash Flow $11.031 billion
Enterprise Value / EBITDA 16.0x

Company Profile: The Home Depot, Inc.

The Home Depot, Inc. operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, lawn and garden products, and d├ęcor products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself and professional customers.

The company also offers installation programs that include flooring, cabinets and cabinet makeovers, countertops, furnaces, and central air systems, and windows; and professional installation in various categories sold through its stores and in-home sales programs, as well as acts as a contractor to provide installation services to its do-it-for-me customers through third-party installers.

In addition, it provides tools and equipment rental services. The company primarily serves homeowners; and professional renovators/remodelers, general contractors, handymen, property managers, building service contractors, and specialty tradesmen, such as electricians, plumbers, and painters. It also sells its products online.

As of February 3, 2019, the company operated 2,287 stores in the United States, including the Commonwealth of Puerto Rico, and the territories of the U.S. Virgin Islands and Guam; Canada; and Mexico. The Home Depot, Inc. was founded in 1978 and is based in Atlanta, Georgia.

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