Saturday, November 14, 2009

Home Depot Inc. (NYSE: HD): Q3 Earnings Preview 2009

. Saturday, November 14, 2009

By Stock Wizard

Home Depot Inc. (NYSE: HD), the world's largest home improvement specialty retailer, is scheduled to report third quarter earnings before the market open on Tuesday, November 17, 2009. Analysts on average expect the company to report earnings of 36 cents per share on revenue of $16.29 billion. In the year ago period, the company reported earnings of 45 cents per share on revenue of $17.78 billion.

The Home Depot, Inc. is the largest retailer of do-it-yourself merchandise, which includes building materials, home improvement supplies, and lawn and garden products. At the end of the second quarter, the company, which employs more than 300,000 associates, operated a total of 2,240 retail stores, including 1,974 namesake stores in the United States, 178 stores in Canada, 77 stores in Mexico and 11 stores in China.

The company's fortunes are closely tied to the housing market. In 2008, Home Depot's net sales decreased 7.8% from 2007 to $71.3 billion and same store sales decreased 8.7% for the year as the company struggled amid subprime mortgage crisis and turmoil in the financial industry.

The company slashed costs, slowed the pace of expansion, kept inventory lean, consolidated operations and reduced capital outlays amid faltering demand.

The Atlanta, Georgia-based company reported a 7.2% drop in profit for the second quarter, as net sales as well as comparable store sales declined amid weak labor market. However,the company still managed to beat Wall Street forecasts. Second-quarter net earnings dropped to $1.116 billion, or $0.66 per share, from $1.202 billion, or $0.71 per share, in the comparable quarter last year. On an adjusted basis, the company earned $1.127 billion or $0.67 per share compared to $1.212 billion or $0.72 per share in the previous year. Quarterly sales slipped 9.1% to $19.07 billion from $20.99 billion a year ago. Analysts, on average, expected the company to report $0.59 per share on revenue of $19.23 billion. Comparable store sales for the second quarter declined 8.5%, with a 6.9% fall in comparable store sales for U.S. Stores. The company managed to improve its gross margin by 32 basis points to 33.5% in the second quarter from last year.

In August, the company raised its fiscal 2009 earnings per share forecast, based on its year-to-date performance, and said that it now expects earnings per share from continuing operations to be flat to up 7% from last year. Previously, the company had expected earnings per share from continuing operations to be flat to down 7% from last year. On an adjusted basis, the company expects earnings per share from continuing operations to decline by 15% to 20%. Earlier, Home Depot had expected adjusted earnings per share from continuing operations to decline by 20% to 26%. The company anticipates fiscal 2009 sales to decrease 9% from fiscal 2008. Home Depot earlier had said that its full-year comparable store sales is projected to decline in the high single-digit, and gross margin expansion to be flat to slightly positive.

Meanwhile, there are visible signs of recovery in the US housing market, thanks in part to the government's tax-credit for first-time home buyers. Early in November, the National Association of Realtors said its Pending Home Sales Index rose 6.1% in September to 110.1, its eighth straight monthly rise.

In September, the company signed a deal with diversified media and merchandising company Martha Stewart Living Omnimedia Inc. (NYSE: MSO) to create a new line of home improvement products.

In terms of stock performance, Home Depot shares have gained 13% since the beginning of the year. Shares of the company rose 49 cents or 1.83% to close at $27.31 on Wednesday.

Full Disclosure: None.

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