Are More Gains Ahead for HD Stock?
U.S. retailer The Home Depot, Inc. (NYSE:HD) raised its annual forecast after reporting higher-than-expected earnings, sending HD stock to its highest levels ever.
The Atlanta-based company is optimistic about continuing its success, with plans to boost sales by 5.7% for the year and adjusted earnings per share (EPS) by 14% to $5.36, higher than the market’s expectations of $5.31. In the third quarter, net income increased 12.2% to hit $1.74 billion, while adjusted EPS were $1.35, three cents higher than expected. (Source: “Home Depot posts earning beat,” CNBC, November 17, 2015.)
The fact that revenues increased 6.4%, reaching $21.82 billion—higher than the forecasted $21.76 billion—suggests that The Home Depot’s profitability is not the result of management strategies, special one-time events like the sale of a major asset, or layoffs. Home Depot’s profits have come the old-fashioned way: pure and simple growth.
This Could Send HD Stock Soaring
Not surprisingly, even though HD stock has never ceased to follow its almost vertical stock chart curve since 2010, shares shot up well over four percent, trading at $126.20 in New York. The increase in comparable store sales growth was reported at 5.1% and U.S. store growth alone was 7.3%. (Source: Ibid.) The Home Depot group operates 2,273 stores, focusing on North America, with locations in the United States, Puerto Rico, the Virgin Islands, Guam, Canada, and Mexico.
Chart courtesy of www.StockCharts.com
The Home Depot experienced solid growth in all regions and in all residential and business product segments. In the third quarter, The Home Depot said its results included a charge of $20.0 million related to its system having fallen victim to a cyber attack last year, during which the data of some 50 million customers was stolen. (Source: “Data breach still a headache for Home Depot,” AJC.com, October 24, 2015.)
The company said it would buy $2.0 billion of Home Depot stock in the fourth quarter, bringing the total for stock buybacks to $7.0 billion for the full year.
The Home Depot has managed to drive its path to the top of the home renovation market in North America since 1978. Its strategy has been to adapt to the local market. Moreover, The Home Depot has been able to win over men and women alike, the latter being a target audience The Home Depot has seduced by adapting the tone of its communications and fostering an inspiring environment, selecting products that women would find attractive. (Source: “How appealing to women has helped The Home Depot,” Management Issues, October 3, 2014.) As The Home Depot has discovered, both male and female consumers are more likely to choose a store that offers a great diversity of products, brands, and specials.
HD stock has also grown thanks to the company’s ability to read its costumers’ needs, particularly when it comes to starting and completing renovation projects, as the DIY scene continues to gain steam.
The Bottom Line on HD Stock
The results have been clear for all. Like few others, HD stock has enjoyed steady growth, starting 2015 at $100.00 and trading more than 20% higher, outperforming the S&P 500 by 28.27% with 45 days more to go before the start of 2016. At this rate, Home Depot stock could be worth $160.00 in no time.