HD Supply Holdings Inc (HDS) stock went lower on the morning of Thursday the 9th of June 2016, after the industrial distributor posted lower than expected revenue for the 2016 fiscal first quarter.
Shares of HD Supply Holdings declined by 1.02% to $36 during the first hour of the trading but however, recovered by 0.4% by noon after the industrial distributor reported weaker than expected revenue for the 2016 fiscal first quarter.
Before Thursday’s market opened, the Atlanta-based company said revenue rose by 7.3% to $1.78 billion year over year. But this figure was below analysts’ projections of $1.84 billion. Adjusted earnings of 51 cents per share topped analysts’ expectations of 47 cents per share.
For the second quarter, HD Supply sees adjusted earnings per share between 85 cents and 90 cents on revenue of $2 billion to $2.05 billion. Analysts are modeling earnings of 84 cents per share on revenue of $2.12 billion.
The company’s strengths can be seen in multiple areas, such as its notable return on equity, revenue growth, compelling growth in net income, good cash flow from operations and solid stock price performance. Its strengths outweigh the fact that it has had generally high debt management risk by most measures that were evaluated.
Just last week, HDS shares closed Friday at $34.70, down 0.23%, translating to a 3.95% increase for the week. Wall Street expected the industrial products retailers to deliver an increase in earnings, while revenue was projected to fall.
For the quarter that ended April, analysts expected the Atlanta-based company to deliver earnings of 46 cents per share, up from 25 cents a year ago, on revenue of $1.84 billion, down 17.3% year-over-year. For the full year ending January, earnings were projected to rise 50% year-over-year to $2.61 per share, while full-year revenue of $7.85 billion would mark a 6.2% rise from the year-ago period.
In its fourth quarter earnings, reported in March, HD Supply beat analysts’ estimates on both adjusted earnings per share and revenue. The company posted adjusted earnings of 27 cents per share, which beat Wall Street estimates by 3 cents. Revenue of $1.65 billion grew 7.1% year-over-year and beat analysts’ forecast by $20 million.
During the quarter the company benefited from strong performances in all three major business segments, led by 8.2% revenue increase in Facilities Maintenance. Its Construction & Industrial business grew at more than 12% year-over-year, while its Waterworks delivered revenue gains of 3.3% year-over-year.
Last week, analysts raised their price target on the stock to $40 from $36. “We have revisited our investment thesis and remain constructive given accelerating free cash generation, a favorable facilities maintenance segment outlook (+60% of EBIT) and an enhanced margin/return profile,” they wrote in a note to investors.
Combined with an 8% increase in fourth quarter adjusted EBITDA, reaching $167 million, HD Supply looked poised to sustain its streak of earnings beats following the recent close of the sale of its Creative Touch Interiors business which is why its Q1 earnings and revenue came as a surprise.