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Home Depot (HD) Tops on Q3 Earnings and Sales on Strong Demand

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The Home Depot, Inc. (HD - Free Report) has posted third-quarter fiscal 2021 results, wherein earnings and sales beat the Zacks Consensus Estimate and improved year over year. The company gained from the continued strong demand for home-improvement projects, robust housing market trends, and ongoing investments.

Shares of the leading home improvement retailer rose 1.2% in the pre-market session following the strong results. The Zacks Rank #2 (Buy) stock has risen 15.7% in the past three months compared with the industry's growth of 19.6%.

Home Depot's earnings of $3.92 per share improved 23.3% from $3.18 registered in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of $3.41.

 

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Net sales advanced 9.8% to $36,820 million from $33,536 million in the year-ago quarter and beat the Zacks Consensus Estimate of $34,972.8 million. Sales benefited from the continued robust demand for home-improvement projects. The company is effectively adapting to the high-demand environment, driven by investments in its business and its associates' dedication to serving customers.

Its overall comps grew 6.1%, with a 5.5% improvement in the United States. In the reported quarter, comps were aided by a 12.9% rise in average ticket, driven by high-value purchases by home builders. This was partly offset by a 5.5% decline in customer transactions as the demand for DIY projects remained softer than the year-ago quarter due to the lapping of the high demand environment for home-improvement projects last year. Sales per square foot rose 6.2% in the reported quarter.

In dollar terms, the gross profit increased 9.7% to $12,563 million from $11,456 million in the year-ago quarter, primarily driven by robust sales growth. This was partly offset by higher cost of goods sold. Meanwhile, gross profit margin contracted 10 basis points (bps) to 34.1% from 34.2% in the year-ago quarter.

The operating income increased 19.4% to $5,795 million, while the operating margin expanded 120 bps to 15.7%. The operating margin benefited from top-line growth, offset by gross margin contraction as well as higher SG&A and other operating expenses.

The Home Depot, Inc. Price, Consensus and EPS Surprise

 

The Home Depot, Inc. Price, Consensus and EPS Surprise

The Home Depot, Inc. price-consensus-eps-surprise-chart | The Home Depot, Inc. Quote

Balance Sheet and Cash Flow

Home Depot ended third-quarter fiscal 2021 with cash and cash equivalents of $5,067 million, long-term debt (excluding current maturities) of $36,712 million, and shareholders' equity of $1,035 million. In the first nine months of fiscal 2021, the company generated $13,386 million of net cash from operations.

In the first nine months of fiscal 2021, it paid out cash dividends of $5,264 million and repurchased shares worth $10,374 million.

3 Other Stocks to Consider

We have highlighted three other top-ranked stocks in the Retail - Wholesale sector, namely Tractor Supply Company (TSCO - Free Report) , Lowe's Companies (LOW - Free Report) and Fastenal (FAST - Free Report) .

Tractor Supply Company, a rural lifestyle retailer in the United States, currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of TSCO have jumped 16.7% in the past three months. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tractor Supply Company's current financial year sales and earnings per share suggests growth of 19% and 23.9%, respectively, from the year-ago period's reported figures. TSCO has an expected EPS growth rate of 9.6% for three-five years.

Lowe's, the main competitor of Home Depot, currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 10.1%, on average. Shares of LOW have rallied 28.9% in the past three months.

The Zacks Consensus Estimate for Lowe's current financial year sales and earnings per share suggests growth of 4.4% and 28.9%, respectively, from the year-ago period. LOW has an expected EPS growth rate of 14.1% for three-five years.

Fastenal, a national wholesale distributor of industrial and construction supplies, currently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 2%, on average. Shares of FAST have risen 10.5% in the past three months.

The Zacks Consensus Estimate for Fastenal's current financial year sales and earnings per share suggests growth of 5.5% and 5.4%, respectively, from the year-ago period. FAST has an expected EPS growth rate of 9% for three-five years.