Home Depot (HD, Financial) reported its second quarter 2015 earnings results on Aug. 18. The company reported revenue of $24.8 billion and earnings per share of $1.71. Revenue for the quarter beat analysts’ consensus estimate by $110 million and earnings per share were in line with consensus.
Revenue for the quarter was up 4.2% from the year-ago quarter. Revenue for the first half of the year was also up 5.1% to $45.7 billion. Earnings of $2.2 billion increased 9% from the second quarter of 2014. Earnings per share also improved 14% from the comparable quarter. For the first half of the year, net earnings were up 11.2% to $3.8 billion and earnings per share increased 17.1%.
Continued growth in the housing market has been a key factor for the improved sales revenue at Home Depot. Just this week, the Housing Market Index released by the National Association of Home Builders reported an increase to 61 from 60 as surveyed home builders reported increased confidence in the market. Housing starts released by the U.S. Census Bureau also showed a strong monthly increase of 0.2% to a seasonally adjusted annual rate of 1.206 million.
Comparable store revenue growth specifically in the U.S. was significantly higher for Home Depot in the second quarter as housing market momentum increased. The company reported comparable store revenue growth of 5.7% in the U.S. with total comparable store revenue growth of 4.2%.
Margins also improved for the quarter. Home Depot’s gross profit margin was 33.69%, up from 33.63% in the comparable quarter. The net earnings margin for the quarter was also higher at 9.00% versus 8.61% in the comparable quarter.
The company also reported increased earnings guidance for the year. Home Depot increased its revenue growth guidance for 2015 to 5.2% to 6.0%, up from 4.2% to 4.8%. It also increased its comparable store revenue growth rate from 4.0% to 4.6%, to 4.1% to 4.9%. Management also reported an increase in its earnings per share guidance for the year. It expects earnings per share for the year to be up approximately 14% to $5.31 to $5.36. The new earnings guidance is an increase from $5.24 to $5.27.
Overall, the strong positive earnings correspond with the strong recovery in the housing market, which is a positive for the U.S. economy overall. The results helped the stock open higher for the day at $121.83. In the day’s trading following the announcement, the stock gained 2.51% to close at $122.80. The improved earnings guidance helps increase its fair value to $131.50 giving it some additional upside in the near-term.
In the second quarter, investment managers actively traded the stock with buy ins from Steven Cohen (Trades, Portfolio) and an increased position from First Eagle Investment (Trades, Portfolio). In the second quarter, Steven Cohen (Trades, Portfolio) of Point72 Asset Management bought 287,775 shares of Home Depot, giving it a 0.22% portfolio position in his portfolio and increasing his position in the retail sector to 9.59%. First Eagle added to its portfolio holding in Home Depot buying 900,077 shares. After First Eagle’s stock buy, the portfolio holding increased to 0.32% and its portfolio position in the retail sector increased to 2.15%.
