Home furnishings retailer, The Home Depot, Inc. (HD) is on a roll since the company posted spectacular second-quarter fiscal 2014 results where both the top- and bottom-line beat estimates. Shares of the company have risen nearly 6% since the earnings release and 15.3% year-to-date.
Moreover, this Zacks Rank #2 (Buy) stock hit a 52-week high of $93.52 on the last trading day before eventually closing at $93.50, instilling confidence among investors.
The company benefited primarily from the recovery in its spring season sales as well as strength in its core store activities and in all geographies, which facilitated quarterly adjusted earnings to jump nearly 22.6% year over year to $1.52 per share. Earnings beat the Zacks Consensus Estimate of $1.44.
Net sales advanced 5.7% year over year to $23,811 million and surpassed the Zacks Consensus Estimate of $23,570 million. The company’s overall comparable store sales (comps) also climbed 5.8% while comps in the U.S. stores grew 6.4%. The year-over-year improvement in the top line was mainly attributable to a 4.2% rise in the number of customer transactions and an increase of 1.8% in average ticket size.
The company also raised its earnings per share growth guidance on a diluted basis for the fiscal to 20.2% from the earlier anticipated growth of 17.6%. Therefore, Home Depot now expects fiscal 2014 earnings to come in at $4.52 per share instead of the previous forecast of $4.42. This clearly indicates management’s confidence in its growth prospects.
Further, during the first six months of 2014, the company generated $5,397 million of cash from operations and deployed its available funds towards share buyback, dividend payment, capital expenditures and long-term debt repayment.
Home Depot, which competes with Lowe’s Companies Inc. (LOW), announced a quarterly cash dividend of 47 cents a share, marking its 110th consecutive dividend payment, on a quarterly basis.
These regular dividend payments are common for companies enjoying a stable cash position and free cash flow generating capacity. All aforementioned factors underscore the company’s healthy financial status, instilling further confidence among investors and providing impetus to the stock.
Home Depot is currently trading at a forward P/E of 18.4x, an 11.6% discount to the peer group average of 20.81x. Home Depot’s last traded price is also 0.8% below the Zacks Consensus average analyst price target of $94.27, leaving room for an upside potential for the stock. The company’s estimated long-term EPS growth rate is an impressive 14.7%, enhancing its positive fundamentals.
Apart from Home Depot, Signet Jewelers Limited (SIG) and The WhiteWave Foods Company (WWAV) also hit 52-week highs of $118.27 and $35.36, respectively, on Aug 29, 2014.
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