Per Briefing.com: Home Depot (HD) 64. The world's largest home improvement retailer posts another solid, steady, earnings report. Before the open, Home Depot (HD) reported fiscal second quarter (Jul) earnings of $0.44 per share. That was 2 cents ahead of the First Call average estimate and 3 cents ahead of the Zacks estimate.
It also represented a strong 42% increase on a per share basis from the $0.31 of the prior year second quarter. Revenue was up 28.2%.
Apparently, stock market gains are leading homeowners to make improvements. Or at least the strong economy is providing solid support.
But HD also is outperforming the economy. The average transaction rose 7%, and comparable store sales rose 11%. Each customer is buying more, and each store has more customers. Not surprisingly then, HD reported that pretax margins were the highest since 1992. Furthermore, HD added 49 new stores in the last quarter.
HD stock has been in something of a holding pattern, having hit 60 back in January. This is in part because higher interest rates might slow down the housing business, but is really more related to the fact that the stock had reached very pricey levels. Even now, HD trades at 50 times trailing earnings.
That is not unreasonable, however, given that the overall market trades near 40, and HD has earnings growth well in excess of the overall market. In Briefing.com's view, the stock is now reasonably priced, extremely well managed, and will continue to have strong earnings momentum. That is why on June 9 of this year we added HD to our Core Investment candidates list. It is still on it, and we still like the stocks' prospects from here. Numbers like today show why. - DG
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