Home Depot (HD, Financial) is truly making it count as reflected in its fourth-quarterly results for fiscal 2014. Its net income for the quarter amplified 36%, while sales improved 8.3% over the same period a year earlier.
Its sales for the full year rose 6% to $83.17 billion against $78.81 billion a year ago. Also, its net income increased 18% to $6.34 billion or earnings of $5.34 per share.
It is not only the earnings growth but also the appealing capital returns program that should keep the shareholders attached to the company. Home Depot declared a 26% increase in dividend to $0.59 a share, up 12 cents and promised to purchase nearly $18 billion authorized shares by the end of fiscal 2017. The company remains committed with its capital allocation program to create value for shareholders in the future.
Home Depot is seeing great momentum across its comps. This growth is being supplemented through enhanced e-commerce capabilities that have become tailwind for the company. Its comp grew 8.9% in the United States during the fourth-quarter.
Growth strategies
Furthermore, the company is executing various programs such as profit sharing programs and spring Black Friday event. Also, it is working closely with the suppliers, partners and leveraged customer insight data in order to deliver rich experience to its customers across the world. This data along with enhanced e-commerce capabilities should sustain its growth in the long-run and create values for shareholders.
It also has several new product categories in grill and patio to be launched this spring. The company has a new and exclusive brand launch in grill with Nexgrill. It plans to introduce several new and world-class models from Weber and Kitchenaid. It is additionally expanding its assortment online. This should facilitate plentiful options to its customers from premium grills to pizza ovens. It is seeing growth with its patio assortments, including a new collection from Brown Jordan, new fabric and colour options in its ‘Create Your Own’ collection and expanded accessories offerings.
It is bringing in new colours such as red, black and brown for Vigaro mulch. This should excite the gardeners as the company gives twelve month colour guarantee at a great value. Home Depot expects these exciting products and exclusive items like goods, grills and outdoor power equipment should accelerate its sales this spring and drive its profitability.
Home Depot projects 4.5% growth for its comps each in the United States and globally for fiscal year 2015. Also, it expects earnings per share of $5.11 to $5.17 for the year. This indicates significant growth for the home improvement retailers.
Conclusion
Home Depot is seeing strong momentum across its comps. Also, the exciting and exclusive offerings this spring should improve its profitability this fiscal year. The analysts expect its earnings to grow at CAGR of 14.52%, greater than average industry CAGR of 12.78% for the next five years. This is fairly good earnings improvements in the long-run.
Moreover, the stock still remains cheap as it trades at the forward P/E of 19.61, which is below the trailing P/E of 24.94. It has PEG ratio of 1.52 that continues to support its growth in the coming years. Home Depot has profit and operating profit margins of 7.63% and 12.59% respectively for the past twelve months. Its balance sheet carries total cash of $1.72 billion and has total debt of $17.20 billion. Home Depot has operating cash flow of $8.24 billion and levered free cash flow of $6.59 billion.
