Morningstar | HD Supply Again Raises Full-Year Guidance Following Strong Third-Quarter Results
In what's becoming a welcome theme for HD Supply, the narrow-moat industrial distributor yet again raised its full-year guidance after beating Wall Street estimates. HD Supply's fiscal third-quarter revenue grew 18% year over year (9% excluding the A.H. Harris acquisition) to $1.6 billion, about 1% higher than the consensus estimate; its adjusted EBITDA grew 16% to $248 million, beating the consensus estimate by about $2 million; and its adjusted diluted EPS increased 25% to $1, beating the consensus estimate by $0.01. Following another strong quarter, management now expects full-year revenue of about $6 billion, adjusted EBITDA of $862 million, and adjusted EPS of $3.36 (all at the midpoint of guidance). We expect to increase our fair value estimate by about 2%, mainly due to the time value of money since our last update.Both the facilities maintenance segment and the construction and industrial segment contributed to HD Supply's strong third-quarter revenue growth; facilities maintenance grew sales 7% year over year to $810 million and the C&I segment grew sales 30% (12% excluding the A.H. Harris acquisition) to $803 million. While the C&I segment expanded its adjusted EBITDA margin by 100 basis points to 12.3% due to the segment's strong selling, general, and administrative expense leverage, the facilities maintenance segment's EBITDA margin declined 70 basis points to 18.4% due to investment spending and higher freight and labor costs, which unfavorably affected the segment's operating leverage.
HD Supply continues to leverage its strong balance sheet and cash flows to return cash to shareholders via share repurchases. Through Nov. 30, the firm has spent $216 million on share repurchases, and the board authorized an additional $500 million share repurchase program. The firm has $656 million remaining under its buyback authorizations.
HD Supply's C&I segment has been the firm's strongest performer in fiscal 2018, and based on management's nonresidential construction outlook, that strong performance should continue into 2019. CFO Evan Levitt noted during the earnings call that the firm continues to see strong activity in large, multiyear commercial projects. Aside from being a source of revenue growth, these types of projects should provide HD Supply's management with better visibility, too.
HD Supply Holdings is a holding company. Through its subsidiaries, the company is an industrial distributor in North America. The company's segments include: Facilities Maintenance and Construction and Industrial. The company's Facilities Maintrnance segment distributes maintenance, repair and operations products, provides services and fabricates custom products. Products include electrical and lighting items, and plumbing, heating, ventilating, and air conditioning products. The company's Construction and Industrial segment distributes hardware, tools and materials to non-residential and residential contractors. Products include tilt-up brace systems, forming and shoring systems, concrete chemicals, and cutting tools.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.