Bearish stock to watch: HD Supply Holdings Inc (NASDAQ: HDS)

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HD Supply Holdings Inc (NASDAQ: HDS) stock fell over 4.21% on 10th September, 2019 and continued its bearish momentum falling over 0.1% on September 11th, 2019 pre market session after the company posted mixed results for the second quarter of FY 19. The company has reported the net income for the quarter to $119 million after $132 million in the year-ago period. The 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 fell 0.8% to $244 million, adjusted Ebitda margin fell 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.

HDS in the second quarter of FY 19 has reported the adjusted earnings per share of $1.08, beating the analysts’ estimates for the adjusted earnings per share of $1.07, according to the FactSet consensus. The company had reported the adjusted revenue growth of 1.3 percent to $1.62 billion in the second quarter of FY 19, missing the analysts’ estimates for revenue of $1.63 billion. The facilities maintenance sales grew 1.2% to $830 million to beat expectations of $822.4 million but construction and industrial sales increased 1.8% to $795 million to miss expectations of $804.5 million.

Moreover, net sales for May, June and July of fiscal 2019 were $464 million, $521 million and $639 million, respectively. Average year-over-year daily sales growth for May, June and July was 0.2 percent, 1.9 percent and 2.1 percent, respectively. Preliminary Net sales in August 2019 were approximately $521 million, which represents year-over-year average daily sales growth of approximately 1.6 percent.

For the current third quarter, the company expects adjusted EPS of 96 cents to $1.05, compared with the FactSet consensus of $1.04, and sales of $1.62 to $1.67 billion, which is below expectations of $1.69 billion.

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.

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