Shares of Home Depot are up 3.5%in early U.S. trading after the home-improvement retailer reported what Goldman consumer expert Scott Feiler called the "biggest EPS beat in 16 quarters."
We had positioning marked as just a 3 out of 10 in our pre-EPS positioning scorecard. That compared to LOW at a 5. Historically, we rarely have HD below a 5.
A small sales miss was expected and instead, we got a beat. This was also the first time they beat operating margins in the last 5 quarters and led to their biggest EPS beat in 16 quarters. The upside was driven by gross margins, so we will need to hear if that's sustainable.
Is this a thesis changer? No. However, it removes some of the recent near-term concerns that had begun to be more discussed (margin misses, small top-line miss/negative comps had been expected and no current buyback to support EPS upside).
4Q EPS of $2.72 vs. Consensus $2.53, with revenues ~30 bps ahead and comp sales of +0.4% vs. Consensus -0.4% (think bogey was -0.5% to -1%). Gross margins beat by 40 bps and SG&A was in line, leading to a nice operating margin beat. The FY guide is exactly in line with what they gave at their analyst day on December 9th, which was expected (EPS 0 to +4% and comps 0 to +2%).
The results suggest that the appetite for home renovation projects is steady despite a frozen housing market and inflation concerns. Home Depot gained market share last quarter and achieved double-digit e-commerce growth for a third straight quarter.
Multiple Wall Street analysts point to better-than-expected gross margin, with RBC analysts citing likely support from lower shrinkage, supply chain efficiencies, and better product mix.
Here's more from Wall Street analysts (courtesy of Bloomberg):
RBC (sector perform), Steven Shemesh
"4Q results exceeded fairly muted expectations," with comp sales growing +0.4% (RBC -0.2%/consensus -0.4%) and adj. EPS coming in ~7% ahead
Source: ZeroHedge News
