Home Depot shares fell after report due to lack of forecast for 2021

The company's earnings and shares

Home Depot reported a strong fourth quarter, exceeding analysts' estimates, but did not give definite forecasts for 2021 because of the pandemic and the difficulty of forecasting consumer sentiment.

Home Depot (HD) shares, up 11.5% over the past 12 months, fell sharply by 3.12% on Tuesday despite the release of a strong quarterly report.

Home Depot data for Q4 2020

For the fourth quarter ended December 31, 2020, Home Depot reported a 16% increase in earnings per share (from last year's value) to $2.65, up $0.04 from analysts' estimate of $2.61. Quarterly net profit rose to $2.9 billion, up from $2.5 billion in the same period in fiscal 2019. Meanwhile, earnings were negatively impacted by the completion of the $110m acquisition of HD Supply Holdings on 24 December 2020.

Revenue rose 14% to $32.3bn, up from the average analyst forecast of $30.66bn.

For the full fiscal year 2020, Home Depot's sales showed an increase of nearly 20% to $132.1 billion, with annual earnings of $12.9 billion compared to net income of $11.2 billion in fiscal 2019.

Home Depot raises dividend

On Tuesday, Home Depot also announced a 10% increase in its quarterly dividend to $1.65 per share, corresponding to an annual dividend of $6.60. The dividend is payable on 25 March 2021 to shareholders of record at the close of business on 11 March this year. The company noted that this is the 136th consecutive quarter that Home Depot has paid a dividend.

Home Depot growth in 2021

Despite three consecutive quarters of growth, Home Depot management has not given revenue and earnings guidance for fiscal 2021 because of the difficulty in forecasting consumer demand in the current macroeconomic environment.

Home Depot's performance is often a kind of "barometer of the industry" of housing, which is now heavily dependent on unemployment rates and support from the US government. Also, this week the US House of Representatives will vote on the $1.9 trillion bill, which includes direct payments of $1400 to most Americans. Housing industry stocks will react to the outcome of this vote.