Home Depot Earnings: Strong Margins Rise as Net Income Rises

Falling revenue did not prevent S&P 500 (NYSE:SPY) component Home Depot, Inc. (NYSE:HD) from reporting a profit boost in the first quarter. The Home Depot, Inc. is a home improvement retailer that sells an assortment of building materials, home improvement and lawn and garden products.

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Home Depot Earnings Cheat Sheet for the First Quarter

Results: Net income for the home improvement store rose to $812 million (50 cents/share) vs. $725 million (43 cents/share) in the same quarter a year earlier. A rise of 12% from the year earlier quarter.

Revenue: Fell 0.2% to $16.82 billion YoY.

Actual vs. Wall St. Expectations: HD beat the mean analyst estimate of 49 cents/share. Estimates ranged from 47 cents per share to 54 cents per share.

Quoting Management: “We continued to improve our business and delivered double-digit earnings growth,” said Frank Blake, chairman & CEO. “Our sales declined slightly due to a slow spring selling season, but for the year we expect sales to grow in line with the guidance we previously provided. We will maintain our focus on providing great customer service and product and project values. I would like to thank our associates for their hard work and dedication.”

Key Stats:

Last quarter marked the fifth consecutive quarter of gross margins expanding as the company’s gross margin expanded 0.3 percentage point to 34.6% from the year earlier quarter. Over that span, margins have grown on average 0.5 percentage point per quarter on a year-over-year basis.

The company has now seen net income rise in three-straight quarters. In the fourth quarter of the last fiscal year, net income rose 71.6% and in the third quarter of the last fiscal year, the figure rose 21%.

A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the first quarter of the last fiscal year, which saw revenue rise 4.3%.

Competitors to Watch: Lowe’s Companies, Inc. (NYSE:LOW), Builders FirstSource, Inc. (NASDAQ:BLDR), Lumber Liquidators Hldgs., Inc. (NYSE:LL), Tractor Supply Company (NASDAQ:TSCO), Hornbach-Baumarkt-AG (NYSE:HBM), PulteGroup (NYSE:PHM), Toll Brothers (NYSE:TOL), D.R. Horton (NYSE:DHI), KB Home (NYSE:KBH), Lennar Corp (NYSE:LEN), Beazer Homes (NYSE:BZH), Sherwin-Williams (NYSE:SHW), Sears Holdings (NASDAQ:SHLD), Target (NYSE:TGT) and Wal-Mart (NYSE:WMT).

Stock Performance: Shares of HD are down 0.19% from the previous close of $36.98.

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