Home Depot Tops Earnings

The stock is up this morning on a good earnings report. The company beat the Street’s forecast by four cents a share:

Home Depot Inc., the world’s largest home-improvement retailer, said fourth-quarter profit rose on sales of major appliances and cabinets.
Net income climbed to $1.29 billion, or 60 cents a share, from $1.04 billion, or 47 cents, a year earlier. Sales in the period ended Jan. 29 increased to $19.5 billion from $16.8 billion, the Atlanta-based retailer said today in a statement sent by PR Newswire.
Profit was helped as U.S. consumers spent more on refrigerators, cabinetry and faucets to remodel their kitchens and bathrooms. Chief Executive Robert Nardelli is also seeking to boost sales to professional contractors with last month’s $3.19 billion acquisition of Hughes Supply Inc.
Home Depot is “going after the larger contactors and infrastructure-related businesses,” said Peter Jankovskis, director of research at Oakbrook Investments LLC, which has $1 billion under management, including about 760,000 Home Depot shares. “It’s given them greater exposure to large homebuilders and municipalities as well and that’s a much more steady source of income.”
Shares of Home Depot were unchanged at $41.86 on Feb. 17 in New York Stock Exchange composite trading. They fell 5.3 percent last year, while rival Lowe Cos.’s gained 16 percent.
Home Depot made more than a dozen acquisitions in the past year to build its supply business into a unit with $12 billion in revenue. The company, which has more than 2,000 stores, is increasing sales to professionals and expanding in Mexico, Canada and China to keep pace with the faster growth at Lowe’s.
Forecast
Piper Jaffray & Co. analyst Michael Cox expected Home Depot to earn 56 cents a share in the quarter, the same as the average estimate of 22 analysts surveyed by Thomson Financial. Minneapolis-based Cox is the top-ranked analyst for Home Depot by StarMine Inc. Thomson declined to disclose the parameters for the estimates in its average.
Last month, Home Depot affirmed its fiscal 2005 earnings forecast of $2.64 to $2.67 per share. The average estimate of 21 analysts surveyed by Thomson is $2.67. The company projected an 11 percent sales gain for last year.
Analysts are estimating Home Depot will earn $3.03 this year, one cent below Cox’s estimate.
Nardelli, 57, said last month that he will slow the company’s retail expansion. Home Depot will open as many as 500 stores through 2010, about 75 less than in recent years.
‘Growth Company’
“While the looming saturation of home-improvement retail boxes in this country is bringing a natural slowdown in the rate of new store growth, Home Depot remains a growth company,” Cox wrote in a research note on Jan. 20.
U.S. spending on home remodeling increased 4.3 percent both in the fourth quarter and for all of 2005, according to the Harvard Joint Center for Housing Studies.
The company said on Jan. 19 annual sales will grow as much as 17 percent over the next five years and earnings per share will rise as much as 14 percent.
Home Depot’s sales have gained an average of 11 percent a year over the past three years. Revenue for Lowe’s, which has about 1,200 stores, increased an average of 16 percent over the same period.
Lowe’s reports fourth-quarter earnings on Feb. 27.
Home Depot met or exceeded analysts’ estimates in the four prior quarters. Of the 24 Home Depot analysts tracked by Bloomberg, 16 recommend buying the shares, eight suggest holding them and one has a “sell” rating.

Posted by on February 21st, 2006 at 10:03 am


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