Home Depot Had Another Great Quarter. Why the Stock Is Still Falling.
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Both Home Depot and Lowe’s, which stories its outcomes on Wednesday, have been pandemic winners.
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Home Depot
inventory is falling regardless of better-than-expected fourth-quarter outcomes and information that the home-improvement retailer is elevating its dividend, as traders fret about its post-pandemic future.
Home Depot (HD) stated it earned $2.9 billion, or $2.65 a share, in contrast with $2.28 per share in the year-earlier interval. Revenue climbed 25.1% to $32.3 billion. Analysts have been in search of EPS of $2.63 and income of $30.63 billion.
Comparable gross sales climbed 24.5%, simply forward of the 19.2% consensus estimate. Home Depot logged a 12.8% improve in transactions, whereas the common transaction dimension grew greater than 10%. The firm additionally raised its dividend 10%, to $1.65 a share, or $6.60 yearly, payable on March 25.
It didn’t present monetary forecasts for fiscal 2021, citing persevering with uncertainty surrounding the Covid-19 pandemic.
Home Depot inventory was down 2.3% to $269.50 in early buying and selling. The shares have gained 3.9% yr up to now, and 15.1% in the previous 12 months.
The inventory, together with Lowe’s (LOW), which can report earnings on Wednesday, have been main beneficiaries of the Covid disaster. Lockdown orders, making it potential for giant numbers of individuals to work remotely however rising the period of time spent at residence, meant that extra folks purchased new properties and launched into enchancment tasks. That ongoing energy was evident in the fourth quarter.
Like all pandemic winners, Home Depot faces questions on the way it will preserve its momentum as soon as the menace of the virus fades with mass vaccination. Plenty of analysts have argued that the residence enchancment retailer will still be able to do well, due to a healthy housing market, the market share it gained in 2020, and government stimulus spending that’s giving customers extra flexibility. Bulls will level to the dividend elevate, which displays the firm’s confidence in its monetary energy, as a comforting sign.
Yet traders could have been in search of extra reassurance, particularly in the type of a full-year forecast. While there have been different issues to nitpick in the report, like a slight decline in margins, the lack of an outlook is probably going the essential cause that the inventory was falling in early buying and selling.
Management did be aware that if late-2020 traits proceed into this yr, same-store gross sales can be flat to barely optimistic for 2021. But skeptics aren’t positive that demand will maintain up.
While the upbeat fourth quarter itself bodes properly for Lowe’s report on Wednesday, it too could elevate considerations amongst traders whether it is equally tight-lipped about the yr forward.
Write to Teresa Rivas at [email protected]
