HD Supply Holdings (HDS 41.50, -1.18) has given up 2.8% in pre-market as cautious guidance for the first quarter overshadows a slight earnings beat.
The industrial distributor reported above-consensus fourth quarter earnings of $0.44 per share on a 3.3% year-over-year increase in revenue to $1.64 billion, which was just ahead of market expectations.
Gross margin increased 60 basis points year-over-year to 34.3% while operating margin also rose 60 basis points, to 8.9%.
Looking at the segment breakdown, the company generated sales growth in all of its units, but the pace of growth slowed down relative to the remainder of the company's fiscal year.
Facilities Maintenance net sales grew 2.3% to $620 million. This was below the full-year segment net sales growth rate of 2.7%. Adjusted earnings before interest, taxes, depreciation, and amortization accounted for 15.8% of fourth quarter net sales, down from 16.8% of sales one year ago.
Fourth quarter Waterworks net sales grew 3.4% to $551 million while full year sales increased 4.5%. Adjusted earnings before interest, taxes, depreciation, and amortization represented 7.6% of net sales, down slightly from 7.7% of sales one year ago.
Construction & Industrial net sales increased 4.3% to $466 million, also down from the full-year growth rate of 6.8%. Adjusted earnings before interest, taxes, depreciation, and amortization made up 8.6% of net sales, up from 7.6% one year ago.
In addition to reporting fourth quarter results, the company released preliminary results for February, showing average daily sales growth of 6.4% year-over-year. Broken down by segment, Facilities Maintenance average daily sales were up 0.2% in February, Waterworks average daily sales increased 15.0%, and Construction & Industrial average daily sales were up 5.3% in February.
Going forward, the company expects first quarter earnings between $0.60 and $0.68 per share, which is towards the low end of market estimates. First quarter revenue is expected between $1.84 billion and $1.89 billion, which envelops current market expectations.