Please ensure Javascript is enabled for purposes of website accessibility

Home Depot Demolished Third Quarter Earnings Estimates

By Joseph Solitro – Nov 19, 2013 at 4:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

On November 10, Home Depot released third quarter earnings that far exceeded analyst expectations.

Home Depot (HD 5.02%) released its third quarter report on November 19 and it blew past expectations on both the top and bottom lines. Its shares have had a strong 2013, rising over 27% year-to-date and are responding to the news positively today as well. Let's take a look at the earnings blowout that caused the stock to soar.

Home improvement giant
Home Depot is the largest home improvement specialty retailer in the world. It currently operates 2,260 locations in the United States, Puerto Rico, U.S. Virgin Islands, Canada, Mexico, and Guam. The company was founded in 1978, went public in 1984, and has been a part of the Dow Jones Industrial Average since 1999.

Source: Home Depot Investor Relations

The results
Third quarter results were released today, Nov. 19, and it was an impressive set of statistics. Here's an overview of the key metrics:

Metric Reported Expected
Earnings Per Share $0.95 $0.89
Revenue $19.50 billion $19.17 billion

Earnings per share grew 28.4% and revenue rose 7.4% compared to the third quarter in 2012. Global comparable-store sales rose an incredible 7.4%, with the U.S. showing 8.2% growth. Home Depot's chief executive officer noted continued improvement and strength in the housing market as one of the drivers for its success. Overall, it was an absolute blowout quarter and the stock has reacted accordingly.

Management's outlook
Due to the strong results in the third quarter, management raised its outlook for the remainder of fiscal 2013. The company now expects earnings per share of approximately $3.72, which would represent 24% growth from 2012. Sales are expected to rise about 5.6% for the year, with the help of comparable-store sales rising 7%. An earnings beat and raised guidance is just about as good as it gets in today's market.

Competitor due out
Lowe's (LOW 3.65%) is Home Depot's largest competitor, with 1,758 home improvement stores in the United States, Canada, and Mexico. It is set to report earnings on Nov. 20, before the market opens. Last time it reported, on Aug. 21, Lowe's had a very impressive quarter in which earnings rose 37.5%, net sales rose 10.3%, and margins expanded. With the strong results Home Depot just reported, I am bullish on Lowe's; however, it is within a point of its 52-week high, so I would not be buying before the results are released.

The Foolish bottom line
Home Depot reported an absolutely incredible quarter. The results allowed management to raise its full-year guidance and management now predicts 24% growth from 2012. Home Depot is one of the greatest public companies in the market today; it can offer price appreciation, a healthy dividend, and a management team that is active in initiating share repurchases. Value investors should look to pick up a position in this company on any weakness provided by the market in the coming weeks.

Joseph Solitro has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$282.19 (5.02%) $13.50
Lowe's Companies, Inc. Stock Quote
Lowe's Companies, Inc.
$194.53 (3.65%) $6.86

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.