What Will Drive Home Depot’s Growth In Q1 2019?

Home Depot (NYSE: HD) is set to announce its Q1 2019 (ended April 2019) results on May 21, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $26.4 billion for Q1 2019 (ended April 2019), which would be an increase of 5.8% on a y-o-y basis. The increase is mainly expected as the revenue per square foot metric will continue to rise. Market expectation is for the company to report earnings of $2.19 per share for Q1 2019 (ended April 2019), higher than $2.08 per share in the year-ago period.

Home Depot reported $108.2 billion in Total Revenues in Fiscal year 2018.  The revenue comes from the sale of home improvement supplies like tools, construction products, and related services.

We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Home Depot’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more Consumer Discretionary data.

Key Factors Affecting Earnings:

Revenue to grow:

• The company has seen revenue fluctuating over the quarters. In-spite of the fluctuations, the company has seen a revenue growth in all quarters of FY 2018 vis-à-vis the same quarters of FY 2017. In Q1 2019 we expect the same to continue.
• The company’s revenue growth is mainly contributed by the revenue per square foot metric. It has increased from $399 in 2016 to $456.60 in 2018. Trefis estimates the metric will reach $470.40 by 2019.
• The number of stores and square footage per store metrics have remained nearly flat for a few years now and are expected to continue in the same manner in 2019.

Trend in Expenses:

• Total Expenses have moved in tandem with Total Revenue over the quarters. Cost of Sales has been steady at around 66% of Total Revenue over the quarters and we expect the same for Q1 2019.
• Indirect expenses decreased in FY 2018 and we expect the same to continue in FY 2019 as they are estimated at $8.7 billion.

Full Year Outlook:

• For the full year, we expect gross revenue to increase by 3.2% to $111.6 billion in FY 2019.
• EBITDA margin is expected to increase slightly to around 18.7%.

Trefis has a price estimate of $207 per share for Home Depot’s stock. The value is based on the expectations of revenue growth as the revenue per square foot metric continues its rise and a slight improvement in EBITDA margin.

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