Home Depot: Little Room For Growth

Home Depot (HD) is one of the world’s largest retailers of home improvement goods and services. It is a cyclical company whose performance has a direct correlation with the US housing industry. It was founded in 1978, and it currently operates around 2,260 stores throughout the US, Mexico and Canada.

Rising Growth Rates

Home Depot’s stock price has risen approximately 250% since January 2009, following an improvement in housing construction activity. The company’s same store sales (SSS) started improving from the first quarter of fiscal year 2011 (1QFY11), and SSS growth rose 10.7% YoY in 2QFY13.

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Home Depot Vs. Lowe’s: Who Houses Better Performance

The Home Depot (HD) and Lowe’s Companies, Inc. (LOW) compete in the home improvement retail industry in the US, which comprises retailers that sell plumbing, kitchen fittings, hardware, appliances and other home improvement products.

The total size of the US home improvement retail industry is approximately $129.2 billion by revenues, with Home Depot leading the market with a 58.9% share. Together, Home Depot and Lowe’s account for 97% of the market share by revenues.

Although the demand for home improvement retailers is driven by both new housing starts and existing home sales, Home Depot and Lowe’s Inc.’s revenue growth rates are more dependent on existing home sales than housing starts. Existing home sales drive demand for plumbing, electrical and kitchen products, which are major contributors to these companies’ revenues, while housing starts drive demand for building materials, lumber and millwork, which contribute less to their total revenues.

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Home Depot Earnings Review – 3QFY13

Home Depot was able to beat estimates for the third quarter of FY13. The company also raised guidance on the basis of better operating performance and share buyback activity.
Home Depot is up nearly 2% today after beating analysts’ estimates and raising guidance. However, the company faces the risk of a housing slowdown and will not be able to sustain high single digit growth in same store sales as mortgage rates rise.

Earnings Review

Home Depot’s quarterly results for 3QFY13 beat analysts’ estimates for revenues and adjusted EPS by 1.5% and 5.8% respectively.
The company announced an EPS of $0.95 for the quarter vs. estimates of $0.89. Growth in company’s comparable store sales (comps) and share repurchases both contributed towards driving up the company’s EPS. Its comps were up 7.4% with a major contribution from 8.2% growth in comps from US stores. The company repurchased $1.69bn worth of stock (1.5% of the company’s total market cap) during the quarter.

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Home Depot Company Description

Home Depot, founded in 1978, is one of the world’s largest home improvement retailers. The company has a cyclical nature as it performs well during economic recoveries and vice versa. It operates in four major segments which are: Plumbing, electrical and kitchen, Hardware and seasonal, Building materials, lumber and millwork, and Paint and flooring. Plumbing, electrical and kitchen contributed 31% to total revenues, which was the highest among all segments. The company serves three types of customers: Do-it-yourself (DIY), Do-it-for-me (DIFM) and Professional customers. Home Depot generates 89% of its revenues from US as 88% of its total numbers of stores are located there. Read More: HD

The Home Depot Inc. (NYSE:HD) – Home Depot apologizes for racist tweet

Home improvement maker Home Depot Inc. on Thursday apologized for a tweet that showed a picture of two African-American drummers with a person in a gorilla mask in between them and asked: “Which drummer is not like the others?”

The tweet, from Home Depot’s official Twitter account, @HomeDepot, was part of a “College Gameday” college football promotion on ESPN. It was quickly pulled, but not before people took screen shots of it and it was widely circulated on social media. NBC and CNBC, among others, reported on the Tweet.

The Home Depot, Inc. (HD), with a current value of $108.11B, opened at $75.28. During the trading session, HD traded between $74.78 to $75.71 with a one year range of $60.21 to $81.56. Read more.

Home Depot Apologizes for a Tweet That Offends

Home Depot spent much of Thursday and Friday scrambling to apologize after a message sent from the company’s primary Twitter account, @HomeDepot, was criticized as racially insensitive.

The message, part of a college football promotion, included a picture of two African-American men and a person in a gorilla suit drumming on overturned buckets, with a caption that read, “which drummer is not like the others?” The tweet, which went out midday on Thursday, was quickly deleted. Within hours, Home Depot apologized publicly and said it had fired the people who sent it out.

 

“We have zero tolerance for anything so stupid and offensive,” Stephen Holmes, director of corporate communications for Home Depot, said in an email statement. “The outside agency that created the tweet and the Home Depot associate who posted it have been terminated. Read more.

The Home Depot Inc. (NYSE:HD) – At the Open: New Records for S&P 500, Dow Jones Industrials?

Is it time to pop the champagne and celebrate new stock market highs? The Dow Jones Industrials have risen 0.2% to 15,781.75 at 9:51 a.m.-a record high–lifted by the Home Depot (HD), which has gained 0.9%, and General Electric (GE), which has risen 0.7%. Deutsche Bank’s Alan Ruskin explains why the number isn’t as strong as it looks: Headline GDP 2.8%.

Looking at the stock, its one day range is $76.34 to $77.18 with a one year range of $60.21 to $81.56. HD shares are currently priced at 20.71x this year’s forecasted earnings, which makes them relatively inexpensive compared to the industry’s 25.39x earnings multiple for the same period. 

The company pays shareholders $1.56 per share annually in dividends, yielding 2.00%. In a review of the consensus earnings estimate this quarter, 26 sell-side analysts are looking at $0.89 per share, which would be $0.15 better than the year-ago quarter and a $0.01 sequential increase. Read more.