HD Supply Holdings Tumbles After Release of 2nd-Quarter Numbers

Shares of HD Supply Holdings Inc. (NASDAQ:HDS) tumbled 7.01% to $37.96 in premarket trading on Tuesday after the Atlanta-based industrial distributor missed expectations on GAAP earnings and revenue for the second quarter of fiscal 2019.

GAAP earnings per share were 79 cents, up 11.3% from the prior-year quarter, but they missed expectations by 1 cent.

Revenue came in at $1.625 billion, a 1.3% increase year-over-year but $10 million short of expectations. By business unit, facilities maintenance net sales increased 1.2% to $830 million, and construction and industrial net sales went up 1.8% to $795 million.

Moreover, gross profit increased 1.8% to $633 million for a gross profit margin rate of 39% of net sales, which was up 10 basis points from the same quarter of fiscal 2018. The operating income was $211 million for an operating income margin rate of 13% of net sales. Compared to last year, the operating income was flat while the operating income margin dropped 20 basis points.

Also, adjusted Ebitda declined 0.8% to $244 million, adjusted Ebitda margin declined 40 basis points to 15% and adjusted net income increased 0.5% to $183 million.

The balance sheet had $730 million in total liquidity available in cash and line of credit as of Aug. 4. The company had $2.07 billion in total debt.

For full-year fiscal 2019, the company expects adjusted earnings per share of $3.45 to $3.60 versus estimates of $3.58. The company forecasts sales of $6.1 billion to $6.2 billion compared to projections of $6.26 billion.

The stock price increased 9% so far this year to close at $40.8 per share on Monday. The share price is below the 120-day simple moving average line, but still above the 70- and 30-day simple moving average lines.

The stock has a market capitalization of $6.97 billion. The closing price on Monday was 15.4% above the 52-week low of $35.35 and 15.5% from the 52-week high of $47.13.

The 14-day relative strength index of 68 suggests the stock is neither oversold nor overbought.

Sell-side analysts in Wall Street recommend buying shares of HD Supply Holdings Inc., with an average target price of $46.86, reflecting 15% upside in the stock’s price within 12 months.

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