Home Depot Bucks the Trend

Despite earlier reported weakness from vendors in key categories like paint and appliances (Sherwin-Williams and Whirlpool both delivered weak quarters), wide-moat

Home Depot raised its full-year earnings outlook two pennies, to $6.33, close to our full-year outlook of $6.34. However, it maintained its full-year outlook for revenue growth of 6.3% and same-store sales of 4.9%, in line with our prior 2016 forecast, which we expect to tick up modestly with the inclusion of today’s results. Fiscal 2016 expectations imply that the fourth quarter will slow significantly, with same-store sales below 4% and top-line growth of just over 4%. However, the period will be lapping a strong fourth quarter in 2015 that produced nearly 10% top-line and 7% comp-store growth. Operating margins for 2016 should still rise around 80 basis points in our model, as expenses lever meaningfully in the final quarter of the year.

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