The largest home-improvement retailer in the United States, Home Depot (HD 0.18%), is a good stock to consider if you're looking for consistency, reliability, and strong fundamentals. The home-improvement retailer enjoys a strong streak of earnings. The company topped Wall Street estimates in the last two quarters by 4.17% on average. Home Depot has gained 35% this year, as compared to its competitors, which have only grown 23.23% in the year.
HD stock price movement.
The company is hitting the right notes from its bullish run. Home Depot hit a new 52-week high of $236.86 on Oct. 15. It is currently trading at $231.80. The company has an impressive retail strategy and a strong focus on physical stores.
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Robust financials
In the second quarter, Home Depot was expected to post earnings of $3.07 per share, but it reported $3.17 per share. The company has a P/E ratio of 23.12, which is above the market average of 18.3. The company reported second-quarter revenue of $30.84 billion against analysts' expectations of $30.99 billion. Home Depot has called for fiscal 2019 sales to be up about 2.3% and for same-store sales to be up about 4%. It is expecting earnings per share to grow by 3.1%. Home Depot is one of the top stocks in the market currently.
Home Depot is Amazon-proof
Most people shop at Home Depot when they need tools and materials for home repairs and renovations, which means they need physical stores to go to. Hence, the business remains insulated from Amazon, since most people do not prefer to buy pipes or construction materials online.
Home Depot has introduced digital price labels to enhance the shopping experience. Customers can now view product ratings and reviews in-store as well. The company has noted that the majority of in-store purchases are a result of online visits, and about 50% of online orders are picked up from the stores. Consumer engagement across both the channels generates high traffic and better conversions. Moreover, the company has rolled out automated lockers across 1,100 stores for the pick-up of online orders.
Mitigating trade war risks
Most companies in the U.S. are concerned about the impact of the trade war with China. The tariffs on Chinese goods will have a cost impact on Home Depot and its U.S. revenue. This impact could be as much as $2 billion, but Home Depot's suppliers have shifted some manufacturing outside China to other locations like Thailand, Taiwan, and Vietnam. This reduces the impact of tariffs to about 1%.
Dividend payout of Home Depot
The company has free cash flow per share of $3.06, and its free cash flow per share for trailing the 12 months is $9.92. It has adequate reserves to pay dividends to shareholders. Home Depot has issued a dividend of $1.36 for the quarter. The company has regularly paid dividends since 2013 and enjoys an annual dividend yield of 2.21%.
Home Depot will report its earnings on Nov. 19, 2019.
