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Home Depot Tops Q4 Earnings Forecast, Holds Back 2021 Guidance

Home Depot says 'uncertainty related to the duration of the COVID-19 pandemic and its influence on the consumer' means it's 'limited in its ability to forecast demand for fiscal 2021.'

Home Depot Inc.  (HD)  posted stronger-than-expected fourth quarter earnings Tuesday, thanks in part to a surge in same-store sales, but declined to offer a 2021 profit forecast amid the ongoing pandemic uncertainty.

Home Depot said earnings for the three months ending on February 1, the company's fiscal fourth quarter, were pegged at $2.65 per share, up 16.22% from the same period last year and five cents ahead of the Street consensus forecast. Group revenues, Home Depot said, rose 25.3% to $32.3 billion, again topping analysts' estimates of a $30.61 billion tally.

Same store sales, Home Depot said, rose 24.5% from last year, smashing the Refinitv forecast of an 18.8% advance, but noted that the "uncertainty related to the duration of the COVID-19 pandemic and its influence on the consumer" limited its ability to offer a full-year profit forecast. It also said COVID-related expenses would come in at $250 million for the full year.

"The team demonstrated ongoing flexibility to operate effectively in a very challenging environment and deliver record-breaking sales and earnings. Our ability to grow the business by over $21 billion in fiscal 2020 is a testament to both the investments we have made in the business as well as our associates' unwavering commitment to our customers," said CEO Craig Menear. "We continue to lean into these investments because we believe they are critical in enabling market share growth in any economic environment."

"I am proud of the many ways our associates lived our values by serving our customers, communities and each other during these unquestionably challenging times, and I would like to thank them and our supplier partners for their extraordinary efforts," he added.  

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Home Depot shares were marked 3.8% lower in early trading  following the earnings release to change hands at $264.00 each, a move that would extend the stock's six-month decline to around 8%.

"The world has changed a bit when a 24.5% comp seems like a mixed result," said DA Davidson analyst Michael Baker. "That comp, and the 25.0% comp in the U.S., beat consensus of 19.8%, but were in line with our estimate, last quarter’s results and what most were expecting after strong read throughs." 

"But, margins were light and guidance was relatively non-specific," he added. "Our take is that relative to estimates and expectations, this is a fine result, but probably not a big upside catalyst."  

Home Depot agreed late last year to an $8 billion takeover of HD Supply Holdings HDS, which distributes tools and products to the maintenance and construction sector, in a deal it expected to close in the February quarter. 

Home Depot sold the HD Supply in the business in 2007 to three private equity groups, lead by Bain Capital LLC, for $10.3 billion.