Home Depot Inc Earnings Model (Hromin)
Author: Steven Hromin, Published: February 17, 2020 10:10pm, Category: Earnings Preview (Prior to Fiscal 4Q2019 earnings)
Summary of Model: After scraping by analyst expectations in Q3 2019, Home Depot appears poised to exceed estimates in this upcoming Q4 2019 earnings. My earnings model shows EPS coming in at $2.19, solidly above current estimates of $2.11. Revenue is estimated to come in at $25.79B, driven by the opening of two new stores as well as Comparable Same Store Sales (SSS) of 4.5%. Gross Margins hover around expected values, dipping just below management guidance of 34% as product mix adversely impacts margins. Operating Margin dips to a 4-quarter low of 13.5% for similar reasons, as expense execution is challenged by SG&A deleveraging and lumber prices failing to favor the company. Highlights of the model results include:
Recently, management provided an initial fiscal 2020 forecast as follows:
Given the aftermath of the last quarter's results, I believe sentiment on HD is unfairly negative. If the company reports results similar to those laid out here, I further believe optimism for future performance could push the stock up materially in the days following the February 25, 2020 earnings release. After a deep dive into Home Depot's business model, mission statement, competitive advantage, and potential earnings growth, I believe management can continue to drive success and create value for shareholders.
- Revenue of $25.798B.
- Gross Profit of $8.72B.
- Net Income of $2.378B.
- Store Count as of February 3, 2020 of 2,292.
- Fiscal Year 2019 SSS of 3.4%.
Recently, management provided an initial fiscal 2020 forecast as follows:
- Sales growth between 3.5% - 4%.
- Same Store Sales between 3.5% - 4%.
- Operating Margin of approximately 14.0 percent.
- Gross Margin hovering around 34% on a full-year basis.
Given the aftermath of the last quarter's results, I believe sentiment on HD is unfairly negative. If the company reports results similar to those laid out here, I further believe optimism for future performance could push the stock up materially in the days following the February 25, 2020 earnings release. After a deep dive into Home Depot's business model, mission statement, competitive advantage, and potential earnings growth, I believe management can continue to drive success and create value for shareholders.
| Home Depot Earnings Model (Steven Hromin).xlsx |
Disclosure of Potential Conflicts of Interest: The author of this article/model has no financial investment or other conflict of interest related to the subject company or other companies discussed. Any views made or implied in the content represent the author’s opinions.