Saturday, May 24, 2014

The Home Depot, Inc. (NYSE:HD) Q1 Earnings Preview: Q1 – The Unkind Quarter

The Home Depot, Inc. (NYSE:HD) is scheduled to report first quarter, 2014 sales and earnings before the open of the financial markets on Tuesday, May 20, 2014. On the same day, management will host a conference call at 9 a.m. ET to discuss the results.

Wall Street anticipates that home improvement retailer will earn $0.99 per share for the quarter, which is $0.16 more than last year's profit of $0.83 per share. iStock expects HD to top Wall Street's consensus number, the iEstimate is $1.00.

Revenue, like earnings, is expected to trend higher, increasing 4.3% year-over-year (YoY). The Home Depot's consensus revenue estimate for Q1 is $19.95 billion, more than last year's $19.12 billion.

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The Home Depot is the world's largest home improvement specialty retailer, with 2,263 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.

Predicting an earnings surprise from HD is almost like predicting that the sun sets in the west and rises in the east. The specialty-retailer has exceeded Wall Street's consensus estimate 15 of the last 16 quarterly checkups. On average, Home Depot earned $0.04 more than projected with a range of $0.01 to $0.08 beyond expectations.

For the most part, EPS-Driven price sensitivity followed along with all the bullish surprises. Shares gained ground in the days surrounding 10 of the last 16 earnings announcements. Typically, HD stock moved 3.79% higher when Wall Street was satisfied with the profit scorecard.

[Related -The Home Depot, Inc. (NYSE:HD): More Room For Improvement]

Meanwhile, investors sold-off shares of The Home Depot six times, dropping an average of -3.37%. There appears to be some seasonality to negative reaction as the May announcement i.e. Q1 accounts for three of the six EPS driven corrections, which includes the two worst selloffs of -7.10% and -6.40%. The Emerald month has been anything but green for HD shareholders in the last four years.

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The harsh winter has been a problem for many retailers. Anecdotally, The Home Depots near this author say many empty parking lots during the polar vortex months. However, the spots filled up as the weather warmed up and the most recent trip saw less available parking than can be recalled. That might be bad for Q1 but good for Q2 guidance.

Overall: The Home Depot, Inc.'s (NYSE:HD) history and iEstimate suggest a better than expected result for the home improvement retailer; however, the first quarter has not been kind to investors so earnings traders might consider taking a pass on HD.  

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