June 26, 2024

The Home Depot, Inc. HD has posted fourth-quarter fiscal 2021 results, wherein earnings and sales beat the Zacks Consensus Estimate and improved year over year. The company gained from the continued strong demand for home-improvement projects, robust housing market trends, and ongoing investments. It reported robust average ticket growth amid the inflationary cost environment, boosting the top line.

Shares of the leading home improvement retailer rose 1.4{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} in the pre-market session, following the strong results. The Zacks Rank #3 (Hold) stock has rallied 29.8{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} in the past year compared with the industry‘s growth of 26.2{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}.

Home Depot’s earnings of $3.21 per share improved 21.1{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} from $2.65 registered in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of $3.20.


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Net sales advanced 10.7{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} to $35,719 million from $32,261 million in the year-ago quarter and beat the Zacks Consensus Estimate of $34,614 million. Sales benefited from the continued robust demand for home-improvement projects.

The company’s overall comps grew 8.1{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}, with a 7.6{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} improvement in the United States. In the reported quarter, comps were aided by a 12.4{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} rise in average ticket, driven by high-value purchases by home builders. This was partly offset by a 3.4{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} decline in customer transactions. Sales per square foot improved 8.3{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} in the reported quarter.

In dollar terms, the gross profit increased 9.5{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} to $11,862 million from $10,831 million in the year-ago quarter, primarily driven by robust sales growth. This was partly offset by an 11.3{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} increase in cost of goods sold. Meanwhile, the gross profit margin contracted 40 basis points (bps) to 33.2{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} from 33.6{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} in the year-ago quarter.

The operating income increased 18.2{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} to $4,825 million, while the operating margin expanded 80 bps to 13.5{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}. The operating margin benefited from top-line growth, offset by gross margin contraction, as well as higher SG&A and other operating expenses.

The Home Depot, Inc. Price, Consensus and EPS Surprise


The Home Depot, Inc. Price, Consensus and EPS Surprise

The Home Depot, Inc. price-consensus-eps-surprise-chart | The Home Depot, Inc. Quote

Balance Sheet and Cash Flow

Home Depot ended fiscal 2021 with cash and cash equivalents of $2,343 million, long-term debt (excluding current maturities) of $36,604 million, and shareholders’ deficit of $1,696 million. In fiscal 2021, the company generated $16,571 million of net cash from operations.

In fiscal 2021, it paid out cash dividends of $6,985 million and repurchased shares worth $14,809 million.

The board of directors increased the quarterly dividend by 15{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} to $1.90 per share. This equates to an annualized dividend rate of $7.60 per share. The raised dividend is payable Mar 24, 2022, to shareholders of record as of Mar 10. This marks the company’s 140th successive dividend hike.

Fiscal 2022 View

Home Depot expects the demand trends to be robust in fiscal 2022, assuming the dollar demand rate experienced in the last two quarters to continue throughout the fiscal. The company factors in its historical seasonality to calculate the sales view for fiscal 2022.

HD anticipates sales and comps growth to be slightly positive in fiscal 2022. The operating margin is estimated to be flat with the fiscal 2021 levels. Net interest expenses are expected to be $1.5 billion. It expects an effective tax rate of 24.6{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}. Consequently, the company estimates earnings per share growth in low single-digits for fiscal 2022.

3 Stocks to Consider

We have highlighted three better-ranked stocks in the Retail – Wholesale sector, namely Builders FirstSource BLDR, Lowe’s Companies LOW and Fastenal FAST.

Builders FirstSource is the largest supplier of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers. It currently sports a Zacks Rank #1 (Strong Buy). Shares of BLDR have jumped 71.9{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} in the past year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Builders FirstSource’s current financial-year sales and earnings per share suggests growth of 129.1{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} and 207.6{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}, respectively, from the year-ago period’s reported figures. BLDR has a trailing four-quarter earnings surprise of 71.5{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}, on average.

Lowe’s, the main competitor of Home Depot, currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 14.3{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}, on average. Shares of LOW have rallied 32.1{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} in the past year.

The Zacks Consensus Estimate for Lowe’s current financial-year sales and earnings per share suggests growth of 6.7{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} and 35{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}, respectively, from the year-ago period. LOW has an expected EPS growth rate of 13.8{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} for three-five years.

Fastenal, a national wholesale distributor of industrial and construction supplies, currently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 3.3{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}, on average. Shares of FAST have risen 9.4{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} in the past year.

The Zacks Consensus Estimate for Fastenal’s current financial-year sales and earnings per share suggests growth of 12.6{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} and 11.9{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3}, respectively, from the year-ago period. FAST has an expected EPS growth rate of 9{b930f8fc61da1f29cba34a8cbe30670691f63878f9c98a2d7d5d6527da1fb8f3} for three-five years.

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Fastenal Company (FAST): Free Stock Analysis Report

Lowe’s Companies, Inc. (LOW): Free Stock Analysis Report

The Home Depot, Inc. (HD): Free Stock Analysis Report

Builders FirstSource, Inc. (BLDR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.