Home Depot Inc Earnings Model (Sharma)
Author: Manav Sharma, Published: February 23, 2020 2:18pm, Category: Earnings Preview (Prior to Fiscal 4Q2019 earnings)
Summary of Model: The Key Drivers of the 4Q2019 Home Depot Earnings model incorporates 2019 Holiday shopping numbers, the rebounding of copper and lumber prices, and the de-escalation of the trade war. Strong holiday shopping results this past year as well as improvements in Home Depot’s online store and BOPIS system, which helped deliver a strong comparable-store sale for 4Q2019. Home Depot’s earnings felt the effects of lumber and copper price deflation throughout 3Q2019. The lumber and copper markets in 4Q2019 are back on track and are rising steadily, which should help increase Home Depot’s comparable-store sales as well as their gross margin. The de-escalation of trade wars and the reduction of tariffs will allow Home Depot’s gross margin to grow this quarter as well. As housing numbers continue to improve and homeowners continue to look to remodel their homes, there seems to be a positive outlook for Home Depot coming into 2020. Overall the model has a bullish outlook on Home Depot with projections for comparable-store sales at 4.875% and gross margin at 33.86% for 4Q2019 and comparable-store sales at 3.5% for FY2019.
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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.