Home Depot, Inc. (HD, Financial), the world's largest home improvement chain, reported a 36% increase in its fourth quarter profits. The profits have topped analysts' estimates as consumers spend more on renovations due to the U.S. housing price gains. The largest U.S. home improvement retailer will now buy back around $18 billion worth of shares. Following this announcement, the company shares increased more than 3% in premarket trading.
Home Depot reckoner
Home Depot, founded in 1978, operates many big-box format stores all across the U.S. The company was formed by Bernard Marcus, Ron Brill, Pat Farrah and Arthur Blank. With its headquarters at Cobb County, Georgia, Home Depot is a retailer of construction products as well as improvement services. Some of its major brands are BEHR Paints, GAF ROOFING, Martha Stewart Living, Commercial Electric, etc. Some of its own house brands include Workforce, HDX, Husky, Glacier Bay, etc. The company has gone through more downs than ups. Due to the downturn in the housing market, the company laid off thousands of employees in 2008 and 2009. The company had to pay $100,000 in a disability discrimination lawsuit filed by an employee with cancer. Also, there was a data breach during the month of September last year.
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Revenue statistics
Net income for the last three months through February 2015 rose 36% to $1.38 billion, or $1.05 a share. Barring a few items, net profit was $1 a share, according to a statement given by the company on Tuesday. 25 analysts estimated EPS to be 89 cents, in a data compiled by Bloomberg. According to an estimate from data compiled byThomas Reuters, analysts had expected EPS excluding items at 89 cents a share on $18.7 billion. The fourth-quarter net income rose from 73 cents per share or $1.01 billion in the same time period last year. Same-store sales also saw an increase of 7%. Oppenheimer & Co. Managing Director Brian Nagel said this was above the analysts expectations of 5.5% gain. This reflects on the strengths of the company from an operational point of view. Besides, the high revenue earnings prove that the home improvement market is at a all-time high.
The net sales of the home improvement company increased 8.3% to $19.16 billion for the same quarter ended 1st February 2015. Dividends were also increased from 47 cents per share to 59 cents per share. Nagel said this announcement of a high dividend is consistent with the company's capital allocation plan. An $18 billion stock buyback program is in place, according to the Board. Home Depot is also is seeking to buy back $4.5 billion in stocks in the current fiscal year. A good thing is that the company always returns their excess capital to the shareholders through increased dividends and buybacks, thus ensuring happy shareholders. The company now expects full-year EPS of $5.17 from the previous $5.11 EPS. A subsequent sales growth of 4.7% is also expected from the original 3.5%.
Though Times
In-spite of increased revenues, the dwindling supply of homes seems to be a dangerous threat to the home-improvement company. Younger buyers may prefer to put their own touches to their houses. Besides, the Federal Reserve is planning to increase interest rates this year. This in turn will increase potential buyers' borrowing cost. Last Christmas did not seem to be a favorable season for Home Depot. The company has to take into account all these factors now that it is shining brightly. The company said in a statement that the currency headwinds can also affect the 2015 yearly earnings. It can be affected up to 6 cents per share. Although the stock has soared 44%, the increase is less than that of Lowe's Companies, Inc. (LOW, Financial) its nearest competitor.
