So Home Depot Blew Past Q2 Estimates. What Will Q3 Look Like?

Home Depot Inc. (NYSE: HD) reported second-quarter 2020 results before markets opened Tuesday. The home improvement store posted diluted net earnings per share (EPS) of $4.02 in the quarter on revenues of $38.1 billion. In the same quarter of last year, the company reported EPS of $3.17 and revenues of $30.8 billion. Consensus estimates called for EPS of $3.71 and revenues of $34.5 billion.

Same-store sales in the United States rose by 25% year over year, and 23.4% including international stores.

The company said that it paid out $1.3 billion in “enhanced pay and benefits in response to COVID-19.”

Store traffic, as measured by customer transactions, rose 12.3% year over year to 511.5 million. The average ticket rose 10.1% to $74.12, and sales per square foot rose 23.5% to $629.38.

Home Depot’s cash hoard rose from $2.5 billion a year ago to $14.1 billion, and long-term debt rose from $27.1 billion to $32.4 billion.

Cash flow from operations rose from $8.5 billion to $14.8 billion, and cash flow from investing tumbled from $6.5 billion a year ago to $1.8 billion this year.

The company paid cash dividends totaling $3.2 billion in the quarter and repurchased $791 million worth of stock. The company will pay its regular $1.50 quarterly dividend for the second quarter next month.

Home Depot did not offer guidance, but consensus estimates for the third quarter call for EPS of $2.64 and sales of $28.7 billion. For the full year, analysts are looking for EPS of $10.61 and sales of $118.2 billion. These estimates almost certainly will rise.

Last week the U.S. Census Bureau reported the retail sales rose by 1.2% in the month of July, the third consecutive month of rising sales. The increase, however, was much smaller than in May (18.2%) and June (8.4%).

It’s likely that stay-at-home orders and federal unemployment supplements, along with rising home prices, sent more customers to Home Depot to get a start on those do-it-yourself home improvement projects. With the $600 weekly unemployment insurance expansion ending in late July with no solution in sight, Home Depot’s sales for the month could have begun turning lower. We won’t know that until the company reports third-quarter earnings in November.

Home Depot’s impressive cash pile should stand the company in good stead if the coronavirus forces new lockdowns. Construction supplies are considered an essential business.

Shares of Home Depot traded up about 2.6% in Tuesday’s premarket session to $295.70, above a 52-week high of $289.22 posted on Monday. The stock’s 52-week low is $140.63, and the consensus price target is $278.42.