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Home Depot Plans $15 Billion Buyback after Polar Vortex and Government Shutdown Hit Earnings

Home Depot Inc. plans to buy back as much as $15 billion of stock after quarterly earnings fell short of analysts’ expectations, casting doubt on a growth story that has lifted the stock 50 percent in the past three years.

Fourth-quarter earnings per share were $2.09, the retailer said. Analysts had estimated $2.16. Same-store sales rose 3.2 percent, trailing estimates of 4.5 percent.

Key Insights

With its fourth-quarter disappointment, Home Depot joined a host of other retailers. The results came amid a historic cold snap in the U.S., where it generates more than 90 percent of its sales, and a shutdown of the federal government. Home Depot’s results are often seen as a proxy for confidence in the U.S. housing market. When homeowners believe prices will continue rising, they spend more on renovations. Values had been steadily rising since the recession, but have shown weakness lately. Home Depot took steps to bolster the stock, including increasing its quarterly dividend by 32 percent and authorizing the stock buyback, which will include about $5 billion in repurchases for the fiscal year.

Market Reaction

Home Depot fell as much as 3.2 percent in premarket trading Tuesday. The stock had gained 11 percent this year through Monday’s close.