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Home Depot (HD) Q4 Earnings & Sales Beat Estimates, Dip Y/Y

Home Depot Inc. HD has reported solid fourth-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Meanwhile, the company’s sales and earnings per share declined year over year in the fourth quarter and fiscal 2023.

HD noted that fiscal 2023 was a year of moderation. Nonetheless, the company is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best interconnected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this industry.

Shares of Home Depot declined 2% in the pre-market trading session on Feb 20, driven by the soft top and bottom-line results. The Zacks Rank #3 (Hold) company’s shares have risen 22.7% in the past year compared with the industry's growth of 21.7%.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Q4 Details

Home Depot's earnings of $2.82 per share declined 14.5% from $3.30 in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate of $2.77. In fiscal 2023, the company reported earnings per share of 15.11, down 9.5% from $16.69 in the year-ago quarter.

Net sales fell 2.9% to $34,786 million from $35,831 million in the year-ago quarter. However, sales beat the Zacks Consensus Estimate of $34,551 million. In fiscal 2023, the company’s sales declined 3% year over year to $152.7 billion.

Home Depot's comparable sales fell 3.5% in the reported quarter and 2.7% for fiscal 2023. The company’s comparable sales in the United States declined 4% in the fiscal fourth quarter. Comps were impacted by a decrease in customer transactions and average tickets. In the fiscal fourth quarter, customer transactions declined 1.7% year over year, while the average ticket was down 1.3%. Sales per retail square foot fell 3.6% in the reported quarter.  

Our model predicted comps to decline 3.8% in fourth-quarter fiscal 2023 due to continued headwinds related to lumber and copper deflation. Our model estimated comps for fiscal 2023 to be down 3.3%.

In dollar terms, the gross profit decreased 3.5% year over year to $11,508 million in the fiscal fourth quarter. The operating income fell 12.8% year over year to $4,143 million.

SG&A expenses of $6,679 million grew 2% from the $6,549 million reported in the year-ago quarter.

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

 

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

Other Updates

Home Depot ended fiscal 2023 with cash and cash equivalents of $3,760 million, a long-term debt (excluding current installments) of $42,743 million, and shareholders' equity of $1,044 million. In the 12 months ended Jan 28, 2024, the company generated $21,172 million of net cash from operations.

Concurrent with the earnings release, the company raised its quarterly dividend by 7.7% to $2.25 per share. This sums up to an annualized dividend of $9.00 per share. The raised dividend is payable on Mar 21, 2024, to shareholders of record as of Mar 7, 2024.

FY24 View

Management has outlined its view for fiscal 2024. It notes that the company’s fiscal 2024 will include an additional 53rd week. Home Depot anticipates sales to increase 1% year over year for fiscal 2024, including $2.3 billion of sales contribution from the 53rd week. The company expects comparable sales to decline 1% for the 52-week period.

HD expects to open 12 stores for fiscal 2024. It estimates the gross margin for fiscal 2024 to be 33.9%, with an operating margin of 14.1%.

The company expects an effective tax rate of 24.5% for fiscal 2024. Interest expenses are likely to be $1.8 billion for fiscal 2024. HD estimates earnings per share to increase 10% year over year for fiscal 2024. It expects the 53rd week to contribute 30 cents per share to earnings in fiscal 2024.

Key Picks

Some better-ranked stocks are American Eagle Outfitters AEO, Deckers Outdoor DECK and Fastenal FAST.

American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 5% and 45.4%, respectively, from the previous year’s reported figures. AEO has a trailing four-quarter average earnings surprise of 23%.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It currently flaunts a Zacks Rank #1.

The Zacks Consensus Estimate for Deckers’ current financial-year sales and earnings implies improvements of 15.7% and 38.6%, respectively, from the year-ago period’s actuals. DECK has a trailing four-quarter earnings surprise of 32.1%, on average.

Fastenal, a national wholesale distributor of industrial and construction supplies, currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Fastenal’s current financial-year sales and earnings indicates growth of 6% and 6.4%, respectively, from the year-ago reported numbers. FAST has a trailing four-quarter earnings surprise of 2.6%, on average.

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