Where Home Depot Earnings, Guidance Went Soft

Home Depot sales cool along with real estate market

Home Depot sales cool along with real estate market

Home Depot did the same Tuesday, so if Lowe's hadn't, that would have been troubling.

Separately, official data on Tuesday showed US housing starts hitting a two-year low in December on falling construction of both single and multi-family housing, a significant source of revenue for Home Depot and smaller rival Lowe's.

In the fourth quarter, Home Depot Inc. fell short on profit, revenue and same-stores sales as rising real estate prices cast a chill over USA home sales. The company had a trading volume of 7,349,789 shares, compared to its average volume of 3,655,685. Home Depot's global same-store sales guidance for the full year had been a range of 5.3% to 5.5%.

Lowe's has its work cut out for it, but another year of decisive action and playing catch-up could lead to more outperformance for the stock.

"The housing market remains delicate", he warned.

Not surprisingly, Credit Suisse 's Seth Sigman, who has always been cautious on the shares, warned Lowe's recent run-up means that investors will have to be quite sure of themselves to keep buying in, despite solid results.

The latest numbers also show contracts to buy homes dipped to the lowest level since early 2014, and those declines were seen in every region of the country - including a 13.5 per cent plunge in the South, which is generally the United States' fastest-growing region for housing. And with a material slowdown in the housing market, home improvement products are less likely to be in demand, according to GlobalData Retail Managing Director Neil Saunders.

Net earnings for the fourth quarter of fiscal 2018 were $2.3 billion, or $2.09 per diluted share, compared with net earnings of $1.8 billion, or $1.52 per diluted share, in the same period of fiscal 2017. Diluted earnings per share increased 37.5% to $2.09.

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Fourth-quarter sales at U.S. Home Depot outlets open at least for a year rose only 3.7 percent, lagging Wall Street analysts' forecasts of a 4.5 percent increase, according to IBES data from Refinitiv.

The current quarter was also nicked by a one-time charge or 16 cents per share. The firm had revenue of $26.49 billion during the quarter, compared to the consensus estimate of $26.57 billion. But that too, was short of forecasts.

Comparable store sales rose 3.2% during Q4 2018, missing Wall Street expectations for 4.6% growth. The Atlanta-based company forecasts full-year revenue growth of 3.3% and a 5% jump in comparable store sales.

The Home Depot, Inc operates as a home improvement retailer. The company predicts a gross margin of approximately 34% and an operating margin of 11.4%, while its capital spending for the year is estimated at around $2.7 billion.

A number of equities analysts recently commented on HD shares.

Home Depot chief executive officer, (CEO), Craig Menear, blamed the harsh U.S. winter for Home Depot's Q4 results.

President and CEO Craig Menear said strategic investments launched in late 2017 paid off in 2018. Home Depot makes up about 1.7% of Vantage Investment Advisors LLC's holdings, making the stock its 14th largest position.

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