Home
Depot (HD 190.82, +0.51, +0.27%)
will report fiscal 2019 first quarter results tomorrow morning.
The
home improvement retailer has reported rather exceptional results for years as
the housing market continues to grow unabated. Same store sales growth
accelerated to 6.8% last year from 5.6% in the prior year and the outlook
remains strong given that the Spring selling season is the home improvement
sector's holiday season.
First
quarter expectations are tempered due to the cold weather seen across much of
the country during the quarter. Same store sales are expected to grow 5.5%,
which would match the growth seen in the first quarter of last year. Estimates
were closer to 6% a few months ago. Record lumber prices may offset the cold
weather that delayed some construction activity in the first quarter. Second
quarter results may pick up the slack.
Same
store sales grew 7.5% in the fourth quarter. Big ticket sales were up 10%,
driven by flooring and appliances.
Home
Depot has exceeded quarterly estimates on the top and bottom line six quarters
in a row.
In
February, Home Depot guided for fiscal 2019 EPS of $9.31 with sales up 6.5%,
same store sales up 5%, a 34% gross margin and 14.5% operating margin.
Home
Depot's 2020 financial targets include total sales of $115-120 bln, with annual
sale sup 4.5-6.0% and an operating margin of 14.4-15.0%.
The
home improvement sector has been a safe harbor of sorts for retail investors
because of the strong housing market and the relative insulation from Amazon
(AMZN).
With
a $220 bln market cap, Home Depot trades at just over 20x earnings. Home
improvement peer Lowe's (LOW)
has consistently under-performed Home Depot, resulting in a notable discount at
16x earnings.