HD Supply Swings To Q1 Profit, Sees Q2 In Line

(RTTNews) - Industrial distributor HD Supply Holdings, Inc. (HDS) reported Tuesday a profit for the first quarter compared to a loss last year, reflecting a tax credit, improved operating margins and sales growth.

Adjusted earnings per share topped analysts' expectations, while quarterly net sales matched analysts' expectations. The company also provider earnings and net sales guidance for the second quarter, in line with Street view.

"I am very pleased with our solid first quarter performance. We delivered 6 percent sales growth, 14 percent Adjusted EBITDA growth and 94% Adjusted EPS growth. Despite adverse weather and a challenging environment, we remained focused on controllable execution to deliver profitable growth in excess of our market growth estimates while keeping our teams safe," CEO Joe DeAngelo said in a statement.

The Atlanta, Georgia-based company posted net income of $242 million or $1.21 per share for the first quarter, compared to a net loss of $12 million or $0.06 per share in the prior-year quarter.

Results for the latest quarter include a benefit from the final settlement of an IRS audit that effectively closed tax years 2007 and 2008, resulting in a $189 million non-cash tax credit.

Excluding certain items, adjusted net income for the quarter was $66 million or $0.33 per share, compared to $34 million or $0.17 per share in the year-ago quarter.

On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $0.29 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 6 percent to $2.22 billion from $2.09 billion in the same quarter last year, and matched fifteen Wall street analysts' consensus estimate of $2.22 billion.

The company believes its sales performance represents growth of about 300 to 400 basis points in excess of its market growth estimate.

Net sales for February, March and April were $630 million, $677 million and $914 million, respectively. There were 20 selling days in February, 20 selling days in March and 25 selling days in April. Average year-over-year daily sales growth for February, March and April were 6.6 percent, 5.8 percent and 5.9 percent, respectively.

Facilities maintenance net sales for the quarter increased 5 percent to $635 million, waterworks net sales grew 3 percent to $570 million, power solutions net sales improved 8 percent to $499 million, and construction & industrial - white cap net sales increased 13 percent to $388 million from last year.

The company noted that its preliminary net sales in May was $741 million, up 7.6 percent from last year.

The company said operating margin for the quarter improved about 200 basis points, driven by higher net sales and about 40 basis points gross margin improvement and cost productivity initiatives.

Looking ahead to the second quarter, the company expects adjusted earnings in a range of $0.60 to $0.66 per share, on projected net sales between $2.50 billion to $2.56 billion. Analysts project earnings of $0.63 per share, on revenue of $2.53 billion for the quarter.

In Tuesday's regular trading session, HDS is currently trading at $34.05, up $1.61 or 4.98% on a volume of 1.72 million shares.