Home improvement giant Home Depot will report first quarter results tomorrow morning (HD)

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Last Update: 14-May-18 10:37 ET

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.