The Home Depot Inc. (NYSE: HD) reported first quarter earnings this morning that were close to consensus estimates for both EPS and revenues, but just enough short to give investors pause. The home remodeling store posted EPS of $0.68 on revenue of $17.8 billion. The consensus estimates called for EPS of $0.65 on revenue of $17.93 billion. EPS included a one-time gain of $0.03, bringing the adjusted EPS down to inline with the estimate.
Much smaller competitors Lumber Liquidators Holdings Inc. (NYSE: LL) topped both EPS and revenue estimates when it reported earnings a couple of weeks ago, as did Builders FirstSource Inc. (NASDAQ: BLDR). Lowe’s Companies (NYSE: LOW) reports earnings next week, and consensus estimates call for EPS of $0.42 on revenue of $12.98 billion.
With both Lumber Liquidators and Builders FirstSource coming in handily better than expected, estimates for Home Depot rose by a penny in the last week and were actually up $0.05 over the past 90 days. That’s why the disappointment today — a low bar had been raised and Home Depot couldn’t quite clear it.
The home fix-it stores could be in for more competition from home sales, particularly new home sales if the economy continues to improve. Sales of bank-owned homes rose in February and March though the inventory of these homes has been in decline.
New home sales rose sharply in February, but dropped again in March. Home sales are about half what analysts expect in a healthy home-buying market. Home prices continue to slide slightly in many parts of the country, which encourages buyers able to find financing and cash buyers. If home buying picks up a bit during the summer, the home remodeling stores may feel the crunch again.
Home Depot also said that it expects sales to rise 4.6% for the full year, which calculates out to full-year sales of about $73.6 billion versus the current estimate of $74.11. The company raised its full-year EPS guidance from $2.79 to $2.90, which includes the $0.03 one-time benefit from the first quarter. The consensus estimate had called for $2.91, so the company is still lagging here.
Shares in Home Depot are trading down about -4.5% in the pre-market, at $47.66 in a 52-week range of $28.13-$52.88.