Home Depot tops Q2 profit estimates, warns China tariffs will hurt sales

Home Depot earnings

Home Depot Inc (NYSE: HD) reported better-than-expected second quarter results on Tuesday morning, but the home improvement giant issued a warning that the impact of possible tariffs and lumber price deflation will hurt its full-year revenue.

The company lowered its full-year revenue guidance, but reaffirmed its forecast for per-share earnings. Shares of Home Depot climbed 2.19% to $212.50 in premarket trading. The stock has gained more than 20% so far this year.

HD Earnings & Outlook

Home Depot had net earnings of $3.5 billion, or $3.17 per share in the second quarter of fiscal 2019. That compares with net earnings of $3.5 billion, or $3.05 per share, in the same period last year.

Analysts surveyed by Refinitiv were expecting the company to report earnings of $3.08 per share for the second quarter of fiscal 2019.

Sales came in at $30.8 billion, representing a 1.2% jump from the $30.46 billion reported in the prior-year period. That missed Refinitiv expectations for revenue of $30.99 billion.

Total comparable-store sales, a closely watched metric, grew 3% in the quarter and beat estimates of 3.4%. U.S. comparable-store comparable sales rose 3.1%, the company said.

For the full year, the world’s largest home improvement retailer expects total sales to grow 2.3% and comparable-store sales to rise around 4%. Home Depot still is still expecting per-share earnings to grow approximately 3.1% to $10.03 in fiscal 2019.

Home Depot CEO Comments

“We were pleased with our results as we delivered accelerating comp performance throughout the quarter. I would like to thank our associates for their hard work and continued dedication to our customers. We are encouraged by the momentum we are seeing from our strategic investments and believe that the current health of the U.S. consumer and a stable housing environment continue to support our business,” said Home Depot CEO Craig Menear.

“That being said, lumber prices have declined significantly compared to last year, which impacts our sales growth. As a result, today we are updating our sales guidance to account primarily for continued lumber price deflation, as well as potential impacts to the U.S. consumer arising from recently announced tariffs. We are reaffirming our earnings-per-share growth guidance for fiscal 2019,” Menear concluded.

Home Depot Inc Profile

Home Depot is the world’s largest home improvement specialty retailer, operating nearly 2,300 warehouse-format stores offering more than 30,000 products in store and 1 million products online in the United States, Canada, and Mexico.

Its stores offer numerous building materials, home improvement products, lawn and garden products, and decor products and provide various services, including home improvement installation services and tool and equipment rentals.

The acquisition of distributor Interline Brands in 2015 allowed Home Depot to enter the maintenance, repair, and operations sector, while the tie-up with Company Store brought textile expertise to the brand. – Warrior Trading News