Home Depot (HD) is scheduled to report earnings before the market open on Tuesday, Feb. 21. What should investors expect in terms of results and stock performance?
Back in November, I was concerned Home Depot's valuation was pretty full. I was also worried that the company was facing tough back-half comparisons. In fact, it kind of freaked me out that Home Depot was facing tough comparisons for the next three quarters. Lowe's (LOW) looked like a better buy because of its lower valuation.
The day after my article, Home Depot reported third-quarter fiscal year 2017 (ended January) earnings of $1.60 per share on a 6.1% increase in revenue. Same-store sales for the third quarter were 5.5% and comp sales for the U.S. were up 5.9%.
In the year earlier quarter, Home Depot reported a 5.1% comp, so the company just squeaked by with that 5.5% number. Investors rejoiced and drove the shares higher.
But next Tuesday, Home Depot is up against a 7.1% fourth-quarter same-store sales figure from a year earlier and faces a stiff first-quarter comp of 6.5% down the road.
Analysts are looking for fourth-quarter EPS of $1.33 on $21.73 billion of revenue. For the year, earnings are projected to come in at $6.34 per share on $94.13 billion in revenue, a rise of 6.3%.
For FY 2018, the consensus EPS estimate is $7.16 on $98.3 billion in revenue, up 4%. Using Home Depot's five-year historical multiple of 21 times forward estimates, the stock should be able to reach $150, assuming it can beat those tough fourth- and first-quarter comps.
Since the summer of 2011, when the stock began to significantly outperform the S&P 500, it's been tough to bet against the company.
While I'm still worried about valuation and same-store sales, Home Depot can likely keep hammering out solid performance.