Home Depot Beats Zacks Estimate - Analyst Blog

The Home Depot Inc. (HD) posted second-quarter 2010 earnings of 72 cents per share, beating the Zacks Consensus Estimate by a penny and up 7.5% from 67 cents last year. The prior-year quarter excludes one-time items.

 

Home Depot, the world’s largest improvement retailer, now expects fiscal 2010 earnings to increase 22.6% year over year to $1.90 per share, which remains in line with the current Zacks Consensus Estimate supported by 29 analysts following the stock. The company had earlier anticipated earnings of $1.88 per share in fiscal 2010. 

Home Depot, which competes with Lowe’s Companies Inc. (LOW), said that net sales for the quarter came in at $19,410 million, marginally higher by 1.8% from the year-ago quarter. However, sales fell short of the Zacks Consensus Estimate of $19,584 million. 

 

Comparable-store sales for the quarter rose 1.7% on the heels of merchandise initiatives and supply chain improvement, and marked the third successive quarter of positive growth. Comparable-store sales for the U.S. ascended 1%.

 

Although the economy is showing signs of improvement, we believe that spending on big remodeling projects will likely remain under pressure until the housing market stabilizes, inventory levels regularize and consumer-spending rebounds. The company trimmed its fiscal 2010 sales growth forecast to 2.6% from 3.5% as predicted earlier.

 

Despite the increase in cost of sales by 1.1%, gross profit for the quarter climbed 3% to $6,582 million, aided by top-line growth, whereas gross profit margin expanded 40 basis points to 33.9%.

 

The company ended the quarter with cash and cash equivalents of $2,395 million and total long-term debt of $9,749 million, reflecting debt-to-capitalization ratio of 33.4%, and shareholders’ equity of $19,445 million. Capital expenditures for the quarter were $240 million.

 

Home Depot currently operates 2,244 retail stores, including 1,976 Home Depot stores in the United States, 179 stores in Canada, 80 stores in Mexico and 9 stores in China.