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Alberto Abaterusso
Alberto Abaterusso
Articles (1669) 

HD Supply Holdings Tumbles After Release of 2nd-Quarter Numbers

The company misses on GAAP earnings and revenue

September 10, 2019 | About:

Shares of HD Supply Holdings Inc. (NASDAQ:HDS) tumbled 7.01% to $37.96 in premarket trading on Tuesday after the Atlanta-based industrial distributor missed expectations on GAAP earnings and revenue for the second quarter of fiscal 2019.

GAAP earnings per share were 79 cents, up 11.3% from the prior-year quarter, but they missed expectations by 1 cent.

Revenue came in at $1.625 billion, a 1.3% increase year-over-year but $10 million short of expectations. By business unit, facilities maintenance net sales increased 1.2% to $830 million, and construction and industrial net sales went up 1.8% to $795 million.

Moreover, gross profit increased 1.8% to $633 million for a gross profit margin rate of 39% of net sales, which was up 10 basis points from the same quarter of fiscal 2018. The operating income was $211 million for an operating income margin rate of 13% of net sales. Compared to last year, the operating income was flat while the operating income margin dropped 20 basis points.

Also, adjusted Ebitda declined 0.8% to $244 million, adjusted Ebitda margin declined 40 basis points to 15% and adjusted net income increased 0.5% to $183 million.

The balance sheet had $730 million in total liquidity available in cash and line of credit as of Aug. 4. The company had $2.07 billion in total debt. 

For full-year fiscal 2019, the company expects adjusted earnings per share of $3.45 to $3.60 versus estimates of $3.58. The company forecasts sales of $6.1 billion to $6.2 billion compared to projections of $6.26 billion.

The stock price increased 9% so far this year to close at $40.8 per share on Monday. The share price is below the 120-day simple moving average line, but still above the 70- and 30-day simple moving average lines.

The stock has a market capitalization of $6.97 billion. The closing price on Monday was 15.4% above the 52-week low of $35.35 and 15.5% from the 52-week high of $47.13.

The 14-day relative strength index of 68 suggests the stock is neither oversold nor overbought.

Sell-side analysts in Wall Street recommend buying shares of HD Supply Holdings Inc., with an average target price of $46.86, reflecting 15% upside in the stock’s price within 12 months.

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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