HD Supply Holdings Inc. (HDS) reports mix results for the third quarter

HD Supply Holdings Inc. (HDS) recently announced its financial results for the third quarter. Its adjusted earnings matched consensus forecast but revenue fell short of expectations, sending its shares slightly down in the after-hours trading session on Friday.

The Atlanta, Georgia-based company reported earnings of 1.66 billion, or $10.06 per share for the three months ended November 1, as compared to $131.6 million, or 80 cents per share in the same period of 2019. HD Supply said improvements in construction and industrial business drove the earnings in the latest quarter.

On an adjusted basis, profit slightly moved up to 47 cents per share, as compared to 46 cents per share in the comparable period last year. Analysts surveyed by FactSet were also looking for an adjusted profit of 47 cents.

Revenue for the quarter came in at $827.5 million, representing a surge of just 0.3 percent from the year-ago quarter. On the other hand, analysts on average were expecting HD Supply to post revenue of $836.3 million.

If we look at the month-wise sales performance, revenue for August came in at $268.4 million, while revenue for September was $268.4 million. Moreover, the company generated revenue of $311.8 million in October.

Speaking on the results, the company’s CEO Joe DeAngelo said, “I am very proud of the team as their focused execution continued to deliver improved results, in the face of turbulent end markets and organizational change.”

Moreover, the company said sales for November came in at $222.0 million, up nearly 2.9 percent on a per-day basis when compared to the same month of 2019.

HD Supply stock has performed well this year. The biggest rally the stock experienced so far this year was driven by its merger deal with Home Depot Inc. (HD).

Home Depot is buying HD Supply

Home Depot announced last month that it would acquire HD Supply in a transaction valued at nearly $8 billion. HD Supply will receive $56 for every share of its common stock, which represented a premium of 25 percent to the stock’s trading price at that time.

HD Supply stock skyrocketed more than 24 percent on November 16 when the two companies announced the agreement, marking the biggest single-day surge of the current fiscal year.

The deal will help Home depot to strengthen its foothold in industrial materials and maintenance products.

HD Supply was a part of Home Depot until the industrial distributor giant sold it for $8.5 billion back in 2017. Now it is once again buying the company to boost revenue and improve its supply chain. The acquisition will also help Home Depot to become a dominant player in the multi-billion maintenance and repair market. It plans to fund the deal through a combination of cash and debt.

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The board of directors of Home Depot and HD Supply unanimously have already given consent for the deal, which is expected to close during the first month of the next year.

Analysts coverage

Overall, 11 analysts have covered HD Supply stock over the past year. The average price estimate for the stock is $56 per share. When it comes to recommendations, 14 analysts have been maintaining a rating for the company with the majority of them recommending investors to “Hold” the stock.

Stock performance

HD Supply stock started the year at a price of around $40 in January and continue trading around the same price level for the next couple of months. However, the stock experienced multiple price drops in March mainly due to the impact of coronavirus on the company’s operations.

The stock mostly traded between $25 to $35 between March and June, except rising over the $35 price mark on June 9 when the company announced its financial result for the first quarter. The stock was finally able to reach its pre-pandemic price level of around $40 in August when the company disclosed an agreement to sell its construction and industrial business for $2.9 billion.

Overall, HD Supply stock did well this year. Its share price has jumped nearly 39 percent on a year-to-date basis. The 52-week range of the stock is $21.69-$55.98. Moreover, the total market value of the company stands at $8.687, as per the closing price of $55.83 in the previous trading session.