Earnings preview: Home Depot’s interconnected retail strategy to pay off in Q4

The Home Depot (HD) has been thriving on its prudent growth strategies including the seamless integration of online and offline platforms. The company is well positioned to take advantage of its improved retail channels and the stable demand for home improvement products.

The Atlanta, Georgia-based home improvement retailer is widely expected to report earnings of $2.16 per share for the fourth quarter, up 28% from the year-ago period. Driving the profit growth, revenue is seen moving up 11% annually to $26.6 billion. The results will be published on February 26 before the market opens. The company’s impressive past performance, wherein earnings topped expectations consistently, points to yet another beat this time.

The interconnected retail model, which helped Home Depot achieve robust online sales in the previous quarter, will continue to draw customers to both offline stores and the digital channel. Moreover, the initiatives to ramp up the supply chain and fulfillment facilities complement the efforts to provide customers a more convenient retail experience.

The company is widely expected to report earnings of $2.16 per share for the fourth quarter, up 28% from the year-ago period

Shareholders will also be looking for an increase in quarterly dividend – a trend the company has maintained for several years – considering the positive outlook for top-line and bottom-line performance. The management is planning to open more pilot fulfillment centers this year, buoyed by the success of last year’s efforts in that area.

What needs to be seen is to what extent the recent softness in the housing market and trade-related issues would affect sales, though market watchers are generally upbeat about the demand scenario. Investors seem to be sharing the positive sentiment as the company’s stock made some notable gains ahead of the fourth-quarter report, often outperforming the sector.

Encouraged by the stronger-than-expected third-quarter results, the company in November revised up its full-year sales forecast. Earning guidance was raised by 33 basis points to $9.75 per share. Third-quarter sales advanced 5% annually to $26.3 billion amid strong comparable sales. Earnings surged 36% to $2.51 per share.

Lowe’s (LOW), another leading home decor company, is slated to publish its fourth-quarter numbers on February 27 before the opening bell. The consensus earnings estimate is $0.79 per share.

Home Depot shares maintained a steady uptrend in recent years and hit an all-time high mid-2018. They pared some of the gains in the following weeks and regained momentum at the start of the current year. The stock gained 11% so far this year.

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