In a world where very little is working, Home Depot's (HD) gotcha covered.
The company posted strong earnings of $2.28 per share Tuesday morning on revenue of $25.8 billion for the fiscal fourth quarter. Revenue landed basically in-line with expectations while the EPS number dusted expectations of $2.11.
Home Depot wowed Wall Street with comps sales of 5.2% worldwide and 5.3% in the U.S. for the quarter. That landed FY 2019 comp sales at 3.8% in the U.S. and 3.5% overall. Strong numbers in a retail environment that has been fickle.
The biggest plus for quarter was the 4.1% increase in average ticket size for the customer. That helped the full-year average ticket size increase by 2.4%.
Looking into 2020, management sees a full-year EPS of $10.45, which comes in shy of the $10.54 current estimate. That puts bottom-line growth around 2% compared to 5.3% for 2019.
Revenue is expected to rise 3.5% to 4%, well above 2019's revenue growth of just year 2%. Comparable sales are expected to remain stable in the 3.5% to 4% range as well. Overall, I put the net on the attractive side of the ledger.
I'll offer a little forgiveness as I think we're not seeing the net benefit of the online shift yet. With a full year to get it in gear, there's a better chance we'll see the bottom-line number exceed expectations than the top line, so if management is already guiding the top line and comps to levels of last year or better, then I like the odds of upside potential to EPS. Granted, some of that upside will lay embedded in lower interest rates keeping the housing market strong, but with the current weakness in equities and the threat of coronavirus, lower rates should stay in play through the summer.
Home Depot houses one of the few weekly charts not yet damaged by this week's action. After building higher highs and higher lows throughout most of 2019, the shares hit a wall in the last quarter of the year. This drop followed was by a recovery created a cup pattern.
The start of 2020 has seen the shares move sideways, sketching out a potential handle to go with the cup. A cup-and-handle pattern is a bullish consolidation pattern. Home Depot showcases a handle above the cup, which I find to be a stronger setup, so a weekly close above $247.50 should trigger an additional move higher.
The target on the breakout would be $267.50. Should the shares close below $235, then I would hedge any long position. That type of close would put us back into neutral territory.
If you're long, then stay long with a stop around $235. If you are looking to get in, then I would wait for the trigger of $247.50 to buy.
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