Home Depot Inc Earnings Model (McCabe)
Author: James McCabe, Published: February 17, 2020 9:31pm, Category: Earnings Preview (Prior to Fiscal 4Q2019 earnings)
Summary of Model: Many factors contribute to the Home Depot Q4 2019 earnings estimates, especially the constant commodity growth which includes copper and lumber and the holiday sales. My belief is that starting in the Q4 2019 comparable sales will contribute to a bullish trend into and continuing on in 2020. Comparable store sales will rise in Q4 not only due to the continued growth in commodities but the the holiday sales season. The sales over the past 5 years have only increased and have shown to have a significant impact on retail stores such as Home Depot. Although I believe these positive effects will be better replicated in the 2020 Q1, they will still be up from Q3 considering copper and lumber themselves are selling at a higher price than initially anticipated for this time. It is also important to recognize the upcoming elections which can limit the risk of tariff costs which can lead to a bullish effect on comp sales once again, showing higher margins on sales of commodities.
On the other hand and something that can bring back the comparable store sales is the IT unwinding. Although it is not of major concern, anything as involved as IT, an organizational tool that strong, can take more than a quarter to get fully functioning. So, due to this problem that I see continuing on in Q4, comp store sales won't be as drastic. Some Statistics:
On the other hand and something that can bring back the comparable store sales is the IT unwinding. Although it is not of major concern, anything as involved as IT, an organizational tool that strong, can take more than a quarter to get fully functioning. So, due to this problem that I see continuing on in Q4, comp store sales won't be as drastic. Some Statistics:
- Lumber: OCT. 1st = 361.7 DEC 31st = 426.2
- Copper: OCT 1st = 2.56 DEC 31st = 2.79
- Black Friday (thebalance.com): 2013 - $767.24(spent per shopper) $584.1 billion (total spent) (Increase of) 2.9% 2018 - (per shopper) $1,007.24 $717.5 billion (total Spent) 4.3% (increase of)
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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.