Monday, May 16, 2011

Home Depot Inc. (NYSE: HD): Q1 Earnings Preview 2011

Home Depot Inc. (NYSE: HD), the world's largest home improvement specialty retailer, is scheduled to release first-quarter earnings before the opening bell on Tuesday, May 17, 2011. Analysts, on average, expect the company to report earnings of 49 cents per share on revenue of $17.02 billion. In the year-ago period, the company reported earnings of 45 cents per share on revenue of $16.86 billion.

The Home Depot, Inc. is the largest retailer of do-it-yourself merchandise, which includes building materials, home improvement supplies, and lawn and garden products.  The company operates 2,245 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces, Mexico and China. In fiscal 2010, The Home Depot had sales of $68.0 billion and earnings from continuing operations of $3.3 billion. The company's fortunes are closely tied to the housing market.

In the preceding fourth-quarter, the Atlanta, Georgia-based company's net income was $587 million, or 36 cents a share, compared with a profit of $342 million, or 20 cents, in the year-ago quarter. Revenue grew 3.8 percent to $15.13 billion from $14.57 billion a year ago. Analysts, on average, expected the company to report earnings of 30 cents per share on revenue of $14.79 billion.

At its last earnings call in February, Home Depot lifted its fiscal 2011 outlook. Home Depot forecast fiscal 2011 earnings from continuing operations to be up about 9.5 percent to $2.20 per share, excluding share repurchases. Home Depot's previous forecast for the year was earnings growth, before share repurchases, of about 7 percent to 9 percent, and after share repurchases of about 11 percent to 13 percent. The company now expects sales to be up around 2.5 percent for the year, in comparison to previous growth forecast of about 2 percent to 2.5 percent.  The company plans to open 10 new stores in this fiscal and generate a cash flow of approximately $5.7 billion from the business. Meanwhile, comparable store sales for the year is still projected to increase in low single digits.

Under CEO Frank Blake, the company has slashed costs, overhauled its supply chain and merchandising systems, and improved customer service, all changes that have fattened revenue as well as the bottom line.

However, heavy job losses and reduced access to credit have led to a sharp fall in consumer discretionary spending on big-ticket items. Although the economy is showing signs of revival, spending on big remodeling projects will likely remain under pressure until the housing market stabilizes and consumer-spending rebounds. Furthermore, due to its exposure to international market, Home Depot remains prone to currency fluctuation.  

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