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Alberto Abaterusso
Alberto Abaterusso
Articles (1711) 

HD Supply Holdings Tumbles After Releasing 1st-Quarter Numbers

The industrial distributor also anticipates lower facilities maintenance sales for May

June 12, 2019 | About:

Shares of HD Supply Holdings Inc. (NASDAQ:HDS) tumbled 5.81% to $40.06 on Tuesday after the company disclosed a lower full-year fiscal 2019 outlook with its first-quarter results.

The Atlanta, Georgia-based industrial distributor reported non-GAAP earnings of 84 cents per share, which was 20% higher year-over-year and beat estimates by 3 cents. GAAP earnings were 63 cents per share, reflecting a 31.3% increase.

Revenue grew 7.2% from the prior-year quarter to $1.49 billion and was in line with expectations. By business unit, facilities maintenance net sales grew 6.8% to $772 million, and construction and industrial’s net sales grew 8.3% to $721 million.

“The team overcame significant unfavorable weather in February to deliver on our promises during the first quarter of 2019,” Chairman and CEO Joe DeAngelo said in a statement. “In this current dynamic environment, we are intensely focused on what we can control, delivering profitable growth and executing on our capital allocation strategy.”

HD Supply recorded a 6% increase in gross profit to $585 million, a 50 basis-point decrease in gross profit margin to 39.2%, a 12.6% rise in operating income to $170 million and a 50 basis-point increase in operating income margin to 11.4%. Also, adjusted Ebitda went up 6.8% to $203 million, adjusted Ebitda margin declined 10 basis points to 13.6% and adjusted net income jumped 10% to $143 million.

The balance sheet of HD Supply had $580 million in total liquidity available in cash on hand and line of credit as of May 5.

Additionally, the company informed shareholders that facilities maintenance sales in May were affected by unfavorable weather conditions, disruption at operations at the distribution center in Atlanta and calendar shift.

For full-year fiscal 2019, the company expects adjusted earnings per share of $3.52 to $3.70 compared to the previous $3.52 to $3.81 range and versus estimates of $3.71. The company projects sales to be $6.25 billion to $6.35 billion compared to the previous range of $6.3 billion to $6.45 billion and versus estimates of $6.36 billion.

The stock had a market capitalization of $6.84 billion at close on Tuesday. HD Supply Holdings lost 6% so far this year. The closing price on Tuesday was 13.3% above the 52-week low of $35.35 and 17.6% from the 52-week high of $47.13.

The 14-day relative strength index of 32 suggests the stock is near oversold levels.

For the next 52 weeks, analysts released an overweight recommendation rating for shares of HD Supply Holdings Inc., which means that the share price is foreseen to outperform the overall market. The average target price of $48.27 mirrors 20.4% upside from the share price of $40.06 at close on Tuesday.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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