Home improvement giant Home Depot (NYSE:HD) will announce its fourth quarter earnings results before the opening bell on Tuesday, Feb. 24th. Wall Street is expecting big things from the retailer: The stock recently leapt to an all-time high.
Below, I will spotlight a few key figures for investors to know going into this earnings release, starting with the headline numbers.
Earnings per share and revenue ($0.89 and $18.7 billion)
Wall Street sees Home Depot posting a 22% spike in quarterly earnings to $0.89 per share. That gain would help the retailer close out 2014 with a whopping 21% higher earnings haul. By comparison, Home Depot profit rose 25% in 2013 and 22% in 2012.
Quarterly sales should grow by 6% to $18.7 billion. And within that growth figure, keep an eye on comparable store sales. Comps have accelerated in each of the last three years, from 3.4% in 2011 to 6.8% in 2013. Comps growth this year will not be 7%, but they should still come in solidly positive.
Return on invested capital (24%)
Home Depot should reach a return on invested capital of 24% in the fourth quarter. From the low it hit in the wake of the housing crisis, its ROIC has already more than tripled, leaving smaller competitor Lowe's far behind.
But 24% could just be a stepping stone up to more gains. Management expects ROIC to keep growing toward its long-term goal of 27% by the end of next year.
Stock buybacks ($1.3 billion)
Spiking operating efficiency helps Home Depot deliver mounds of cash to shareholders, even after investing in the business. Through the first nine months of 2014, for example, it spent $1 billion investing in stores.
However, because it generated operating cash flow of more than six times that figure, management could easily fund $2 billion of dividend payments and almost $6 billion in share repurchases. Investors can expect Home Depot to have spent an additional $1.3 billion buying back its stock in the fourth quarter.
Dividend boost (5-for-5)
Home Depot typically announces changes to its dividend policy at the same time that fourth quarter earnings are released. And this year income investors have every reason to expect a huge raise. In fact, it is likely that Home Depot boosts its quarterly payout for the fifth year in a row next week -- by more than 20%.
It is simple math. Management has a stated goal of returning half of Home Depot earnings to shareholders in the form of dividend payments. And those profits are likely to have grown about 21% this year, while the outstanding share count fell. That is why you can look for the company to raise its quarterly payout to around $0.55 per share, which would equate to an annual yield of almost 2%.
One important number that we don't know is the full cost of the data breach that Home Depot suffered through last year. Management said in November that its outlook for the fourth quarter did not include "probable" breach-related losses "that cannot be estimated at this time." However, even a surprisingly high data breach expense would likely be a one-time event. Besides that wild card, investors have many reasons to be optimistic about the fourth quarter report and long-term growth potential for the company.
Demitrios Kalogeropoulos 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.