Home Depot Q4 results: ‘fears of higher rates are largely overblown’

Home Depot Inc (NYSE: HD) on Tuesday reported market-beating results for its fiscal Q4 and announced a 15% increase in dividend. Shares are still down 3.0% this morning.

Q4 financial highlights

• Net income printed at $3.35 billion versus last year’s $2.86 billion.
• Home Depot earned $3.21 per share; an increase from $2.65 per share in Q4 of fiscal 2020.
• Sales were up 10.7% YoY to $35.72 billion in the recent quarter, as per the earnings press release.
• FactSet consensus was for $3.18 of EPS on $34.88 billion in sales.
• Cost of sales jumped 11.3% resulting in a hit to gross margin from 33.6% to 33.2%.
• Comparable sales went up 8.1% in Q4 – well ahead of experts’ forecast.

Dividend hike

Home Depot also hiked its quarterly dividend on Tuesday to $1.90 per share. Commenting on the earnings report, Oppenheimer’s Brian Nagel said on CNBC’s “Squawk Box”:

Full-year guidance

For fiscal 2022, Home Depot forecasts a slight increase in both sales and comparable sales. Its estimate for EPS is for low-single-digit percentage growth. This compares to analysts at 4.6% increase in EPS, 2.2% in same-store sales, and 1.6% growth in overall sales. Nagel added:

Home Depot was a pandemic beneficiary as it was deemed essential and stayed open during the COVID-19 restrictions. As people were spending a lot more time at home, naturally, the demand for home improvement projects noted a sharp increase.

What’s interesting about Home Depot’s Q4 results, therefore, is that it’s a confirmation that the retailer is seeing sustained demand even as the pandemic is subsiding.

Why has the stock sell-off in 2022?

The stock is still down a little under 20% for the year, which Nagel attributes to the fear of rate hikes. He noted: