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Home Depot (HD) Gains on Q1 Earnings & Sales Beat, Ups View

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The Home Depot Inc. (HD - Free Report) reported better-than-expected bottom-line results for first-quarter fiscal 2017, retaining the four-year long trend of beating earnings estimates. Further, sales topped estimates and grew year over year. Results gained from growth across the company’s interconnected platform as well as all regions.

The company’s relentless focus on affording innovative products, boosting interconnected customer experience and driving productivity seems to be paying off. Further, the company continued to reap the benefits of a steady housing market recovery and strong customer demand.

Consequently, shares of this home improvement retailer increased nearly 1.7% in the pre-market trading session. Moreover, Home Depot’s shares have returned 16.3% in the past one year, outperforming the Zacks categorized Building Products–Retail/Wholesale industry’s rise of 11.3%.

The company posted fiscal first-quarter earnings of $1.67 per share, which escalated 16% from $1.44 in the year-ago quarter and beat the Zacks Consensus Estimate of $1.61.

Quarterly Details

Net sales advanced 4.9% to $23,887 million from $22,762 million in the year-ago quarter. Moreover, the top line surpassed the Zacks Consensus Estimate of $23,745 million. The company's overall comparable-store sales (comps) increased 5.5%, while comps in the U.S. grew 6%.

Gross profit in the reported quarter improved 4.7% to $8,154 million from $7,791 million in the year-ago quarter, primarily driven by higher sales. However, gross profit margin contracted 10 basis points (bps) to 34.1%.

Improved gross profit led operating income to increase 8.8% to $3,349 million during the fiscal quarter. Further, operating margin expanded 50 bps from the year-ago quarter to 14%.

Balance Sheet and Cash Flow

Home Depot ended the fiscal first quarter with cash and cash equivalents of $3,565 million, long-term debt (excluding current maturities) of $22,393 million and shareholders' equity of $3,962 million. In first-quarter fiscal 2017, the company generated $4,564 million of net cash from operations.

Fiscal 2017 Outlook

Following the robust fiscal first quarter performance, Home Depot raised earnings guidance for fiscal 2017 while it retained the sales view. The company projects both sales and comps to grow about 4.6% in fiscal 2017.

The company now expects diluted earnings per share to increase nearly 11% to $7.15, including share repurchases. Previously, the company had anticipated earnings per share growth of 10.5% to $7.13.

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


Home Depot, Inc. (The) Price, Consensus and EPS Surprise | Home Depot, Inc. (The) Quote

Zacks Rank

Currently, Home Depot carries a Zacks Rank #3 (Hold). Better-ranked stocks in the retail space are Big 5 Sporting Goods Corporation (BGFV - Free Report) and Build-A-Bear Workshop, Inc. (BBW - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). Another stock worth considering is The Children’s Place Inc. (PLCE - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Big 5 Sporting has gained nearly 57.1% in the last one year. Moreover, it has a long-term earnings growth rate of 12%.

Build-A-Bear has to its credit a solid earnings surprise history with an average trailing four-quarter beat of 67.5%. Moreover, the stock has a long-term earnings growth rate of 22.5%.

Children’s Place, with a long-term earnings growth rate of 8%, has gained nearly 19.2% year to date.

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