Home Depot Inc Earnings Model (McPhee)
Author: Al McPhee, Published: February 2, 2020 9:30pm, Category: Earnings Preview (Prior to the Fiscal 4Q2019 earnings release)
Summary of Model: I believe comp-store sales increase over the next period on the basis of two main factors. First, a bounce back from the lumber market deflation at the end of 2019 and should increase prices with strength. Secondly, with Black Friday deals and seamless online customer experience through a transition to a more digitalized platform that provides customers online sales services and BOPIS lockers will encourage customers to increase purchase volume and retain customers as regular purchasers. Another key externality I see effecting Home Depots' gross margins and comparable store sales is a strong housing market over the coming year. The 30-year bond has a stable outlook over 2020 will create an influx of people looking to invest and refurbish homes. The result is comparable store sales increase to 4.9% in 2019Q4 with 2019FY comparable sales at 3.5% and gross margin increasing to 34% 2019Q4 with the de-escalation of trade wars and the strengthing of the lumber market.
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.