Home Depot shares slid Tuesday after the company once again cut its 2019 forecast and reported same-store sales well below estimates.
The company said revenue, which also missed analysts’ targets, was hurt by investments it is making in its business. Earnings came in a penny better than expected.
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Shares of Home Depot fell as much as 5% but regained some of those losses in premarket trading. Shares of rival Lowe’s, which reports its earnings before the bell on Wednesday, were down 1.6% before the market’s open.
Here’s what Home Depot reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.53, adjusted, vs. $2.52 expected
- Revenue: $27.22 billion vs. $27.53 billion expected
- Same-store sales growth, global: 3.6% vs. 4.7% expected
The company said the investments it’s making in its business have yet to benefit its sales. Home Depot has been spending money updating its stores and digital platform while also improving its supply chain.
“We are largely on track with these investments and have seen positive results, but some of the benefits anticipated for fiscal 2019 will take longer to realize than our initial assumptions,” CEO Craig Menear said in the release.
Home Depot said earnings fell to $2.8 billion, or $2.53 per share, from $2.9 billion, or $2.51 per share, a year ago. Analysts had expected the company to earn $2.52 per share.
Sales increased 3.5% to $27.22 billion, just shy of analysts estimates of $27.53 billion.
Sales at U.S. stores open at least 12 months rose 3.8%. Analysts were expecting a 4.7% gain.
Home Depot also cut its sales forecast for the year. It said it now expects sales to grow by 1.8%, down from a prior estimate of 2.3%. The company also cut its same-store sales forecast for the fiscal year. It now expects growth of 3.5%, compared with an earlier forecast of 4%.
The outlook for earnings per share remains unchanged.
The market for home improvement remains strong, said Brian Nagel, an analyst at Oppenheimer, on CNBC’s “Squawk Box.” He attributed the sales miss to an internal company issue, which he noted is rare for Home Depot, rather than a miss due to economic headwinds, tariffs or lumber price deflation.
“The backdrop of home improvement was quite good,” Nagel said. “The lumber price issue is not as big a deal anymore, weather has been favorable and then we have this, what I have been really been excited about, is this improving overall housing environment.”
Last quarter, when Home Depot trimmed its full-year revenue outlook, it cited potential tariff impacts and lumber deflation as contributing factors.
Jefferies analysts also said the industry remains strong, and pointed to improving home affordability, lower interest rates, aging baby boomers spending money on remodeling, millennials entering the housing market and product innovation.
U.S. housing starts rebounded in October, rising 3.8%, while permits for future home construction jumped to a more than 12-year high.
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Home Depot said its average customer ticket in the third quarter was $66.36, which was higher than it saw in the year ago quarter. Sales per square foot also rose to $449.17 from the year-ago period.
Shares of Home Depot hit a 52-week high on Monday of $239.31. The stock, which is valued at $262 billion, has risen 39% as of Monday’s close. Rival Lowe’s, which has a market value of nearly $89 billion, has gained 24% year to date.
Source: cnbc.com | Original Link