What happened
Shares of home improvement giant Home Depot (HD -0.26%) fell 14% in February according to data provided by S&P Global Market Intelligence. The company posted a solid earnings report, but investors weren't impressed with guidance.
So what
Home Depot is the largest home improvement chain in the world, with 2,300 stores in the U.S., Canada, and Mexico.
Image source: Getty Images.
The retailer enjoyed fantastic growth through most of the pandemic. People stuck indoors with limited forms of entertainment turned to home improvement, and Home Depot, considered an essential retailer, was allowed to remain open. It posted some of its best growth ever.
Now that period is over. But the 2021 fourth quarter was still strong. Sales increased 10% year over year, and comparable sales increased 8%. Earnings per share (EPS) increased 21% to $2.65. For the full year, sales increased 14% to $151 billion, comps were up 11%, and EPS increased 30% to $15.53.
Home Depot also raised its dividend 15%, more than the 10% it raised it the past two years. The full-year dividend of $7.60 yields 2.37% at the current share price.
Guidance for 2022, however, was weak. Management expects sales growth to be only "slightly positive," with single-digit growth in EPS. That makes sense given several factors: It will face tough year-over-year comps given 2021's high growth; the supply chain is still jammed, making any guidance uncertain; inflation is still ballooning, adding to uncertainty; and the world stage is experiencing high volatility, the consequences of which are unknown, but may pressure financial transactions in a variety of ways.
Now what
Home Depot is a retail giant that has invested billions in building out its omnichannel network. It has a fully loaded digital platform and has recently opened several distribution centers and warehouses to improve its delivery capabilities. It's also renovating stores to improve efficiency, testing different ideas to upgrade its model. It's a no-brainer business investors should want to be a part of.
As for guidance, slightly positive isn't negative, and if it can pull that off in these uncertain times and facing last year's high sales, that's impressive. It also pays a growing and reliable dividend, and shares trade at only 21 times trailing-12-month earnings.
Home Depot stock has outperformed the S&P 500 over the past five years, gaining 121% vs. the S&P 500's 84% gain. This is a no-brainer value stock that provides security and income to any portfolio, and you can view any price dip as an opportunity to buy.
