Home Depot on Tuesday reported fiscal first-quarter earnings that beat analysts' expectations, as shoppers spent more in its stores, despite a damp start to the spring in much of the U.S.
Home Depot shares were up less than a percent in premarket trade following the release.
Here's how the company did, compared to what Wall Street expected, according to Refinitiv consensus estimates:
Earnings per share: $2.27, vs. $2.18 expected
Revenue: $26.381 billion, vs. $26.378 expected
Sales at stores open at least 12 months rose 2.5% on a global basis and were up 3.0% in the U.S. This was shy of the 4.2% estimate from Refinitiv, but it wasn't immediately clear if the numbers were comparable due to an extra week in the year-ago quarter.
In the quarter ended May 5, net income rose to $2.5 billion, or $2.27 a share, from $2.4 billion, or $2.08 a diluted share, a year ago. Analysts were predicting the company would earn $2.18 a share.
Revenue climbed 5.7% to $26.381 billion, slightly above Refinitiv's consensus estimate of $26.378 billion.
"We were pleased with the underlying performance of the core business despite unfavorable weather in February and significant deflation in lumber prices compared to a year ago," Home Depot CEO and president Craig Menear said in a company release.
Home Depot said customer transactions were up 3.8% during the quarter, while the average shopper's ticket increased 2.0%, and sales per square foot were up 5.6%.
The company reaffirmed its guidance for fiscal 2019, which estimates earnings will rise 3.1% to $10.03 per share. Same-store sales are expected to grow 5%, while revenue increases 3.3%.
Retailers like Home Depot and rival Lowe's are well positioned in the current environment, Oppenheimer's Brian Nagel said in a note to clients on Monday.
"In our view, a recent, substantial slide in mortgage rates should lead to a steady re-strengthening in key housing metrics, thereby supporting improved sales and, maybe more importantly, undermining meaningfully the still negative market narrative weighing upon multiples within the space," Nagel said. "We are optimistic that as weather turns more spring-like, sales of seasonal merchandise will improve, perhaps markedly."
As of Monday's market close, Home Depot shares, which have a market value of $210.6 billion, are up more than 11% this year and up less than a percent over the past 12 months. Lowe's, which is set to report earnings before the bell Wednesday, is up 18% since January and 24% over the past 12 months. It has a market cap of $86.9 billion.
Clarification: It is unclear how Home Depot same-store sales compare with estimates, since the company reported its results on a 52-week basis. Last year, its fiscal first quarter had 53 weeks. An earlier headline said same-store sales fell short.
Correction: Last quarter, Home Depot's forecast was viewed as disappointing. An earlier story incorrectly said the company cut its forecast.
Morgan Stanley analysts have delivered another blow to Tesla (TSLA), slashing their worse-case scenario for the stock price to just $10 (from $97) because.
Oblique view of the home depot store entrance in Campbell, California. A few people are entering the store; various items are on display on each side, and a couple of trucks are parked under American flags.
Home Depot (HD) exceeded Wall Street’s estimates on the bottom-line in fiscal first-quarter results, but missed expectations for comparable same-store sales as unfavorable weather earlier this year dented demand for the retailer’s products.
The nation’s largest home improvement retailer delivered adjusted earnings of $2.27 per share on revenue of $26.4 billion for its fiscal first quarter. Consensus analysts expected the company to report adjusted EPS of $2.18 on revenue of $26.4 billion for its fiscal first quarter, according to data compiled by Bloomberg. In the year-ago quarter, the company posted sales of $24.9 billion and adjusted EPS of $2.08.
Comparable same-store sales, however, grew just 2.5% overall in the first quarter, versus the 4.3% expected. In the U.S., same-store sales rose 3%. The metric is closely watched by analysts and serves as a measure of efficiency for retail companies.
Home Depot also reaffirmed its guidance for fiscal 2019. It sees revenue growth of about 3.3% for the year, along with a 5% increase in comparable same-store sales. Adjusted EPS is expected to grow 3.1% from last year to $10.03, below the $10.09 consensus analysts expected.
Shares of Home Depot were little changed as of 6:19 a.m. ET ahead of the opening bell, rising 0.52% to $191.75 each.
Heading into earnings results, analysts expected unfavorable weather at the start of the year to have put a chill on home improvement projects and, by extension, results for companies including Home Depot and Lowe’s (LOW). The latter reports results Wednesday.
"We were pleased with the underlying performance of the core business despite unfavorable weather in February and significant deflation in lumber prices compared to a year ago," Home Depot CEO Craig Menear said in a statement.
In the first several months of the year, data on the housing market had been choppy, with mortgage applications spiking between increases and decreases, according to data from the Mortgage Bankers Association. However, home price growth has slowed, and pending home sales were shown to have jumped a much better-than-expected 3.8% in March, creating a market of new homeowners looking for products to help with home improvement projects.
Shares of Home Depot were up 11.1% for the year-to-date through Monday’s close.
Ashley Merson and her brother Kevin on the porch of the house Ashley is trying to buy in the Hampden neighborhood of Baltimore. A ransomware attack on the city's digital services has delayed the home purchase.
Emily Sullivan/WYPR
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Emily Sullivan/WYPR
Anonymous hackers breached the city of Baltimore's servers two weeks ago. Since then, those servers' digital content has been locked away — and the online aspects of running the city are at an impasse.
Government emails are down, payments to city departments can't be made online and real estate transactions can't be processed.
Hackers demanded 13 Bitcoins — worth around $100,000 today — to relinquish their grip. Baltimore City Mayor Jack Young has said the city won't pay. The FBI and Secret Service are investigating, and the city has contracted with a series of experts to assist in restoring service.
The cyberattack is just one of over 20 made on municipalities this year — and cybersecurity experts say it likely will take months for the city to recover.
"Imagine if somebody would sneak into a government building at night, load up a bunch of boxes with all the paperwork for all the pending permits and all the pending house closings and all the pending business that the city was conducting, put it all in a truck and drive away — and demand some money in order to bring that truck back," said Avi Rubin, a Johns Hopkins computer science professor and cybersecurity expert.
"That's a lot easier to do in cyberspace without getting caught," he said. "And that's what's happened here."
An unbreakable algorithm
The hackers used a ransomware called RobinHood — an extremely powerful and malicious program that makes it impossible to access server data without a digital key. And replicating that key without the hackers is impossible, says Rubin, who has testified about his field before Congress.
"I don't even think that the NSA would be able to break this algorithm," he said. "It's believed by the cryptographic community, both the theoreticians as well as the practitioners, to be unbreakable by today's technologies."
Baltimore officials have said they've turned to their peers in Atlanta for advice on how to deal with the ongoing disruptions.
That attack "should have been an alarm for many other cities," Rubin said. "All you need is one link in the chain and that's what the attackers will go after."
Those weak links are often preventable vulnerabilities like old hardware and old software, both of which Baltimore was using.
Medical records protected
Rubin is also the director of the Health and Medical Security Lab at Johns Hopkins. When malware attacks became more common a few years ago, hospitals were hackers' favorite targets — medical records are very valuable and are time-sensitive since they're needed to treat patients.
Hospitals responded quickly to the threat of malware by bolstering cybersecurity with new hardware and software, Rubin says, and are largely no longer affected by bad actors.
"However," he said, "the city of Baltimore, like many local governments, was not at all prepared for something like this. And if it's never happened, it's only natural to say, 'well, this type of thing has never happened before, so why should we spend a lot of money on it?' "
Rubin agrees with Mayor Young's decision not to pay the ransom for that key. If no one attacked by malware paid the ransom, "these attacks would just completely go away," he said.
Unfortunately, Rubin said, many private companies do quietly pay, which has encouraged hackers to keep up ransomware attacks.
One analysis from CyberEdge found that 45% of organizations hit with ransomware end up paying a ransom. Another, from RecordedFuture, found that at least 17% of state and local government entities pay.
With no key, Rubin said the city will have to rebuild its servers from the ground up. That process will likely take months, he said, and will involve implementing new hardware and software and restoring any data the city may have backed up.
Frustrated homebuyer
In the meantime, Baltimore residents are frustrated there wasn't a plan for cyber catastrophes.
"The fact that you have a completely unsustainable computer system with no plan in place for when something like this happens after watching it happen to countless other cities — it's frustrating and disappointing," said Ashley Merson, a 31-year-old nanny.
Merson has been scrimping and saving for a house for four years. She paid off her debts, got her credit score up and finally was able to make an offer on a two-bedroom duplex house. She is more than ready to leave her low-income apartment complex, where she, her young son and disabled brother squeeze into a one-bedroom.
But just as she was about to settle on that house, the malware attacks struck.
"The process of buying a house is so long and tedious anyway," Merson said. "Waiting is tough."
City officials announced the development of a multi-step "manual workaround" plan on Monday, nearly two weeks after city servers were first breached.
The City of Baltimore has developed a manual workaround that will allow real estate transactions to proceed during the City's technology outage. Starting tomorrow, the Wolman Municipal Building will be open from 7am - 7pm, Monday - Friday. Instructions below - please share! pic.twitter.com/lvvoa7maTX
Merson hopes the now-heavy backlog of homebuyers won't delay her move-in any further. Rent at her apartment complex will increase significantly "sometime in the near future," she said.
If that happens while her family is still in limbo, Merson said, "then it's just going to be pretty crappy situation."
On Monday, the U.S. government announced that it will allow Huawei to purchase American-made goods in order to maintain existing networks and provide software updates to its existing handsets, though the company is still barred from purchasing American parts and components to manufacture new products without license approvals that likely will be denied.
That development wasn't game-changing news, experts told CNBC.
"This is not going to ... change overnight again in terms of the fortune for Huawei," said Nicole Peng, vice president of mobility at independent analyst company Canalys.
"The biggest problem for them right now is the uncertainty," Peng said, adding that Huawei's suppliers are concerned about business continuity given their increasing reliance on the Chinese tech giant over the past year.
The latest development came on the back of U.S. President Donald Trump's administration adding Huawei last week to a list that mandated a license for stateside companies if they want to do business with the Chinese company.
That led Alphabet's Google to suspend business with Huawei that involves transferring hardware, software and other technical services. Bloomberg News also reported that companies like Intel, Qualcomm and Broadcom will not supply Huawei until further notice.
The "snowball effect" started by Google likely "forced" the Trump administration to pull back from its stance, said Anshel Sag, analyst at Moor Insights & Strategy. He added that the current situation "looks clearly political and related to the trade war."
For its part, Huawei has stood defiant. The company's founder, Ren Zhengfei, told Chinese state broadcaster CCTV on Tuesday that "the U.S. government's actions at the moment underestimate our capabilities," according to a transcript published by the outlet.
Ren said Huawei was at odds with the U.S. government, not U.S. firms, and that Huawei is capable of making the chips it buys from the United States — though that does not mean it will stop buying American chips.
"I don't necessarily see Huawei changing course," Sag said. "Ultimately, Huawei knows that what's best for their business is to act as if this 90-day pause is not a pause at all."
Google, for its part, said in a statement that the temporary pause allows the U.S. tech giant "to continue to provide software updates and security patches to existing (Huawei) models for the next 90 days."
Who stands to gain
As Huawei's fortunes hit a roadblock, the discussion has shifted to who may stand to benefit the most from the situation.
"(The) biggest winner in the long run will be US IT companies, but in the short term, tension between two countries raises opportunity for Korea," Daniel Yoo, head of global strategy and research at Kiwoom Securities, told CNBC in an email.
In the smartphone segment, where Huawei was among the few companies seeing annual growth in shipments at a time of slowing sales, South Korea's Samsung Electronics would be a beneficiary, Yoo said. Data from Canalys showed Samsung's annual growth in worldwide smartphone shipments declining 10% in the first quarter of 2019, while Huawei surged 50.2%. In the same period, American technology giant Apple smartphone growth slid 23.2%.
Canalys' Peng agreed, saying that Samsung has "the most overlap" in terms of product and segments with Huawei.
Sag offered a different take, saying that Huawei's domestic competitors Vivo and Oppo could have the biggest upside from the telecommunications giant's vulnerability.
Huawei is growing the most in Europe, he said, a region where the two Chinese brands are becoming "more aggressive" and consumers are more dependent on the Google ecosystem.
— CNBC's Fred Imbert, along with Reuters, contributed to this report.
On Monday, the U.S. government announced that it will allow Huawei to purchase American-made goods in order to maintain existing networks and provide software updates to its existing handsets, though the company is still barred from purchasing American parts and components to manufacture new products without license approvals that likely will be denied.
That development wasn't game-changing news, experts told CNBC.
"This is not going to ... change overnight again in terms of the fortune for Huawei," said Nicole Peng, vice president of mobility at independent analyst company Canalys.
"The biggest problem for them right now is the uncertainty," Peng said, adding that Huawei's suppliers are concerned about business continuity given their increasing reliance on the Chinese tech giant over the past year.
The latest development came on the back of U.S. President Donald Trump's administration adding Huawei last week to a list that mandated a license for stateside companies if they want to do business with the Chinese company.
That led Alphabet's Google to suspend business with Huawei that involves transferring hardware, software and other technical services. Bloomberg News also reported that companies like Intel, Qualcomm and Broadcom will not supply Huawei until further notice.
The "snowball effect" started by Google likely "forced" the Trump administration to pull back from its stance, said Anshel Sag, analyst at Moor Insights & Strategy. He added that the current situation "looks clearly political and related to the trade war."
For its part, Huawei has stood defiant. The company's founder, Ren Zhengfei, told Chinese state broadcaster CCTV on Tuesday that "the U.S. government's actions at the moment underestimate our capabilities," according to a transcript published by the outlet.
Ren said Huawei was at odds with the U.S. government, not U.S. firms, and that Huawei is capable of making the chips it buys from the United States — though that does not mean it will stop buying American chips.
"I don't necessarily see Huawei changing course," Sag said. "Ultimately, Huawei knows that what's best for their business is to act as if this 90-day pause is not a pause at all."
Google, for its part, said in a statement that the temporary pause allows the U.S. tech giant "to continue to provide software updates and security patches to existing (Huawei) models for the next 90 days."
Who stands to gain
As Huawei's fortunes hit a roadblock, the discussion has shifted to who may stand to benefit the most from the situation.
"(The) biggest winner in the long run will be US IT companies, but in the short term, tension between two countries raises opportunity for Korea," Daniel Yoo, head of global strategy and research at Kiwoom Securities, told CNBC in an email.
In the smartphone segment, where Huawei was among the few companies seeing annual growth in shipments at a time of slowing sales, South Korea's Samsung Electronics would be a beneficiary, Yoo said. Data from Canalys showed Samsung's annual growth in worldwide smartphone shipments declining 10% in the first quarter of 2019, while Huawei surged 50.2%. In the same period, American technology giant Apple smartphone growth slid 23.2%.
Canalys' Peng agreed, saying that Samsung has "the most overlap" in terms of product and segments with Huawei.
Sag offered a different take, saying that Huawei's domestic competitors Vivo and Oppo could have the biggest upside from the telecommunications giant's vulnerability.
Huawei is growing the most in Europe, he said, a region where the two Chinese brands are becoming "more aggressive" and consumers are more dependent on the Google ecosystem.
— CNBC's Fred Imbert, along with Reuters, contributed to this report.
Huawei, the Chinese telecom giant caught in the center of the U.S.-China trade war, has scrambled to keep its business running after President Donald Trump moved to ban U.S. companies from supplying components to it last week. But Huawei is hardly the only company taking a hit. Many U.S. companies, which are Huawei’s suppliers, are also feeling the heat.
Chipmakers including Intel (INTC), Qualcomm (QCOM), Xilinx (XLNX), and Broadcom (AVGO) have stopped supplying Huawei until further notice, according to Bloomberg. Their shares have been slammed following the ban, which means they could lose a top client.
Broadcom stock, for example, fell more than 5% on Monday. In the third quarter of 2018, the semiconductor maker pocketed $285 million from Huawei, accounting for about 6% of its total revenue. Shares of NeoPhotonics, a San Jose, Calif.-based networking modules manufacturer, plunged more than 30% from last week following the ban, due to its dependence on Huawei.
Chipmakers' shares are getting slammed by the Huawei ban.
“They are good customers, and they buy products, which obviously helps their products be competitive in the global export market. And I hope they continue to do so,” said Hock Tan, CEO of Broadcom, referring to Huawei in March. “But certainly, the overhang of that is something that we are closely monitoring and are very concerned about.”
Top U.S.-based Huawei suppliers
Some companies have even revised their revenue projections in the wake of the ban. On Monday, Lumentum (LITE), a California-based optical and photonic products manufacturer, cut the lower end of its revenue guidance for the current quarter by 7.4%, to $375 million from $405 million. It has discontinued all shipments to Huawei following the U.S. Department of Commerce ban and said it “cannot predict when it will be able to resume shipments.” Sales to Huawei contributed 18% to Lumentum’s total revenue in its latest quarter.
Here is the list of Huawei’s top U.S. suppliers, according to Goldman Sachs:
