Home Depot (HD) Positively Surprises

The Home Depot Inc. (HD), surprised with its fourth-quarter 2010 adjusted earnings of 36 cents a share. The adjusted earnings not only surpassed the prior-year quarters’ earnings of 24 cents (an increment of 50%), but also outpaced the Zacks Consensus Estimate of 30 cents.

For fiscal 2010, adjusted earnings grew by 21.1% to $2.01 a share from $1.66 in the prior fiscal year.

Financial Details

During the reported quarter, net sales inched up 3.8% year over year to $15,126.0 million compared with $14,569.0 million in the prior-year quarter, surpassing the Zacks Consensus Estimate of $14,800.0 million. The growth in net sales was primarily driven by an increase of 3.9% in total company comparable store sales and a rise of 4.8% in comparable store sales in the U.S.

Operating margin for the reported quarter has witnessed an improvement of 186 basis points (bps) to 6.86% compared with 5% in the prior-year quarter. Improvement in operating margin was primarily driven by effective cost management.

For full fiscal 2010, net sales increased 2.75% to $67,997.0 million compared with $66,176.0 million in the prior year, exceeding the Zacks Consensus Estimate of $67,681.0 million. The increase was primarily attributable to a surge of 2.9% in total company comparable store sales and 2.5% increase in comparable sales in the U.S. stores. Operating margin for the fiscal improved 133 bps to 8.59% compared with 7.26% in the prior fiscal.

Balance Sheet, Cash Flow and Dividend

Home Depot ended its fiscal 2010 with cash and cash equivalents of $545.0 million and a long-term debt capitalization ratio of 34.0%. During the reported year, the company generated $4,585.0 million of cash from operations and deployed $2,608.0 million toward share buyback, $1,029.0 million for debt repayment and $1,096.0 million as capital expenditures.

The board of directors of the company has increased its fourth quarter 2010 cash dividend by 6% to 25 cents a share. Since the last 96 quarters, the company has a record of paying quarterly cash dividends to its shareholders.

Fiscal 2011 Guidance and Zacks Consensus

Home Depot is expecting a 9.5% increase in adjusted earnings to $2.20 a share for fiscal 2011 from fiscal 2010 on the back of a 2.5 % increase in sales. The company plans to open 10 new stores in this fiscal and generate a cash flow of approximately $5.7 billion from the business. The current Zacks Consensus Estimate for fiscal 2011 is $2.24 per share, which lies above the guidance.

Home Depot, which competes with Lowe’s Companies Inc. (LOW) and Target Corporation (TGT), currently, has a Zacks #3 Rank, implying a short-term Hold rating on the stock. The company retains a long-term Neutral recommendation.

HOME DEPOT (HD): Free Stock Analysis Report

About Zacks Investment Research 1767 Articles

Zacks Investment Research is one of the most highly regarded firms in the investment industry. In 1978 Zacks originated the concept of utilizing earnings estimates revisions to make profitable investment decisions. Zacks offers multiple investment products and services to help investors achieve superior returns.

Visit: Zacks.com

Be the first to comment

Leave a Reply

Your email address will not be published.