Home Depot (NYSE:HD), the leading home improvement retailer, reported third-quarter results for fiscal year 2023 that met analyst expectations. The company announced a slight decline in revenue and earnings per share (EPS) compared to the previous year, yet managed to exceed analyst projections for both metrics. Home Depot's free cash flow saw a significant increase, reflecting a strong liquidity position.
In the third quarter, Home Depot's revenue fell by 3% year-over-year (YoY) to $37.71 billion, while GAAP profit dropped to $3.81 per share from $4.24 per share in the same period last year. Despite this decline, the retailer outperformed analyst revenue estimates of $37.63 billion and EPS estimates of $3.76 by a narrow margin.
The company's financial health was underscored by an impressive free cash flow of $3.56 billion, marking a 72.1% surge from the same quarter last year. Home Depot also maintained a steady gross margin (GAAP) of 33.8%, mirroring last year's figure.
A modest decrease of 3.1% YoY in same-store sales was reported, yet over the past four years, Home Depot has enjoyed an annualized revenue growth rate of 8.5%. This growth has been primarily fueled by increased sales at existing stores rather than through new store expansions.
CEO Ted Decker noted that customer interest remains strong in smaller projects, although larger discretionary categories have been under pressure. This shift in consumer habits since the pandemic is expected to result in relatively flat revenue for Home Depot over the next 12 months.
Despite these challenges and a forecasted sales decrease of between 3% and 4% YoY for FY23, with diluted earnings projected to decline from 9% to 11% YoY, Wall Street analysts maintain a Moderate Buy consensus on HD stock. This cautious optimism is reflected in the company's stable stock price post-announcement, trading at $290.09 per share.
Home Depot operates 2,333 store locations and boasts a market capitalization of $288.1 billion along with a robust cash balance of $2.06 billion. The retailer's ability to generate significant free cash flow amidst a challenging economic climate demonstrates its resilience and operational efficiency.
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