Why HD Supply Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of industrial distribution company HD Supply Holdings (NASDAQ: HDS  ) sank 13% today after its full-year outlook disappointed Wall Street.

So what: HD Supply's Q2 earnings managed to top estimates -- adjusted EPS of $0.23 versus the consensus of $0.0 -- but downbeat guidance or the full year is triggering concerns over slowing growth going forward. On a positive note, sales increased 10% to $2.3 billion while operating margins expanded 160 basis points, suggesting that its competitive position and efficiency are steadily improving.   

Now what: Management now sees full-year adjusted EPS of $0.52-$0.64 on sales of $8.55 billion-$8.75 billion, versus Wall Street's top-line view of $8.89 billion. "We continue to deliver above market revenue growth in all of our primary business units," CEO Joe DeAngelo reassured investors. "We continue to deliver on our controllable execution and growth initiatives to drive growth regardless of the market environment." Of course, given that the stock still up about 25% from its June IPO even with today's pullback, I'd wait for more of the optimism to fade before jumping in.  

With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disrupters since the personal computer in "3 Stocks to Own for the New Industrial Revolution". Just click here to learn more.



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