Sales growth potential and up to $10 billion worth of buybacks are factors that should continue to strengthen investors sentiments on Home Depot Inc. (NYSE:HD). While the retailer has pulled significantly from its all-time high, the pullback appears to be a minor correction pending further upside action.
Revenues and Earnings Growth
The company is fresh from reporting impressive fourth-quarter and full-year results that topped analysts’ estimates. Revenues and earnings topped estimates as consumers continued to pour more money into home improvement due to the pandemic. Strength in the real estate market also propelled the company to sales growth.
According to the Chief Executive Officer, Craig Menear, the solid results affirm the team's ongoing flexibility in operating under a very challenging environment. Sales growth to over 21 billion comes are the backdrop of a string of investments that the company has made in the business and on associates.
The home builder company reported earnings of $2.86 billion or $2.65 a share against $2.62 a share expected by Wall Street. In contrast, the company reported earnings of $2.48 billion or $2.28 a share the previous year same quarter.
The quarter's net sales were up 25% to $32.26 billion from $25.78 reported the previous year. Net sales also topped Wall Street estimates of $30.73 billion. U.S same-store sales were up 25% as Home Depot saw overall same-store sales grow 24.5% compared to 19.2% growth expected by analysts.
Full-year sales were up 19.9% to 132.1 billion, with comparable sales increasing 19.7%. Net earnings were 12.9 billion or $11.94 billion compared to $11.2 billion or $10.25 a share for 2019.
Dividend Hike
In response to the solid financial results that firm growth in the core business and free cash flow, management has already approved a 10% increase in the dividend to $1.65. The new dividend translates to an annual dividend of $6.60.
Likewise, analysts at Bank of America have raised their price target of Home Depot in the aftermath of the solid results. The analysts rate the stock as a buy with a price target of $360, representing an upside of more than 30%.