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Home Depot's Q1 Earnings May Rise 30%

 May 11, 2012 12:08 PM

(By Mani) Home Depot, Inc. (NYSE:HD) is expected to report a strong growth in earnings and revenue when it reports its first-quarter results on May 15.

Results of Home Depot, a Dow component, are considered by investors as a measure to gauge the ups/downs of the global economy due its significant international reach and the ongoing trends in the housing market.

Wall Street expects the world's largest home improvement retailer to report earnings of 65 cents a share, according to analysts polled by Thomson Reuters. The consensus earnings estimate implies an increase of 30 percent from the same period last year when the company earned 50 cents a share.

[Related -The Home Depot, Inc. (NYSE:HD): More Room For Improvement]

For the past four quarters, Home Depot's earnings have managed to top Street view, with the fourth quarter of fiscal 2011 earnings topping estimates by a wide margin of 19 percent. Analysts have also become increasingly bullish on the company's earnings potential as their consensus estimates have increased from 60 cents over the last three months to the current 65 cents a share.

Quarterly revenues are expected to grow 6.40 percent to $17.9 billion. This could be the strongest sales growth for the company in recent times. In the preceding four quarters, Home Depot sales grew 5.9 percent, 4.4 percent, 4.2 percent and 0.2 percent.

Home Depot, led by CEO Francis Blake, could benefit from its new warehousing and transportation system, which might have a favorable impact on its supply chain, thereby saving costs. On the other hand, investors would be skeptical whether a modest pickup in US economy is enough to boost sales at home improvement retailers.

[Related -A Pause In The Action]

As a result, investors will give more importance to Home Depot's guidance for the full year. Analysts expect the company to earn $2.91 a share on revenue of $74.09 billion for the full year.

In the fourth quarter of fiscal 2012, the company's net earnings rose 31.9 percent to $774 million, or 50 cents per share, from $587 million or 36 cents per share a year-ago. Net sales for the quarter grew 5.9 percent to $16.01 billion on 5.7 percent growth in comparable store sales. Analysts had expected earnings of 42 cents a share on revenue of $15.5 billion.

Analysts, generally, seem to have a positive opinion on Home Depot stock as 20 out of 30 analysts covering the stock rate it as "strong buy" or "buy," while the remaining 10 analysts recommend investors to "hold" the stock. There are no "sell" ratings on the stock.

Shares of Atlanta, Georgia-based Home Depot have gained 36 percent in the last one year and 12 percent in the last 3 months.



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