Pull out your yardsticks and sharpen your carpenter's pencils, Fools. Tuesday is the big day for Home Depot (NYSE:HD) investors -- the day when Big Orange reports on its earnings for the third quarter of 2005.
Analysts are expecting good results, if nothing spectacular, from the company. The consensus among the two dozen-odd analysts polled by First Call is that Home Depot will resume producing the sort of double-digit sales growth numbers that were briefly interrupted back in its fiscal first quarter. Specifically, the forecast calls for 10% sales growth, to $20.7 billion, combined with slightly better profit growth of 13%, to $0.68 per diluted share.
Those results might be enough for Wall Street, but I'm hoping that the Depot will report something a bit better. After all, we're just coming off one of the most destructive hurricane seasons in recent memory. It's hard to imagine that Home Depot couldn't top 10% sales growth in a quarter when much of the country had strong incentive to spend money on plywood, masking tape, and power generators. In addition, since the company's own guidance for this year calls for sales growth of 9%-12%, it seems unlikely that the third quarter (historically, Home Depot's second-strongest for sales) would experience sales growth at the low end of that range.
The company's earnings guidance gives additional reason to hope for strong profit numbers tomorrow. In its Q2 earnings release, Home Depot raised guidance for the full year and predicted that profits should outperform the previous predicted growth range of 10%-14%, coming in closer to 14%-17%. Again, if the full year is expected to produce 14%-17% profits growth, it seems unlikely that the historically strong third quarter would see below-average profits growth.
At last report, Home Depot had $2.3 billion of cash in its coffers and authorization to spend another $1.4 billion remaining in its share repurchase program. Although Home Depot stock now trades for about the same price it fetched back in August, September offered savvy Fools -- and, more importantly, shareholder-friendly Home Depot execs -- the opportunity to buy back shares at an 8% discount from today's price. The more the execs availed themselves of that opportunity, the more we might see earnings per share boosted (as profits are divided up among fewer shares outstanding) when results are announced tomorrow.
Back in June, Home Depot took center stage in the Fool's ongoing series of stock duels. Read all about it in:
- Dueling Fools: Home Depot Bull
- Dueling Fools: Home Depot Bear
- Dueling Fools: Home Depot Bull Rebuttal
- Dueling Fools: Home Depot Bear Rebuttal
Fool contributor Rich Smith does not own shares of Home Depot, a recommendation of the Motley Fool Inside Value newsletter service.
