Earnings Reports Send Home Depot and Best Buy in Opposite Directions

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

For the second day in a row the Dow Jones Industrial Average is flirting with the 16,000 mark. After twice today crossing above and then pulling back below the historic mark, as of 1:15 p.m. EST the Dow is up one point, or 0.01%, to 15,977. The S&P 500 is also fighting to break above the 1,800 mark, but at the moment is down 0.11% to 1,789. As earnings season comes to an end and little economic data is being released today, it would seem this morning's earnings releases are moving the markets more than anything else. Let's take a look at two big retailers that rolled out their reports today.

A winner and a loser
Shares of Home Depot are higher by 1.2% today, while Best Buy has lost 9%.

Home Depot reported quarterly sales of $19.5 billion, which was a 7.4% increase over what the retailer reported at this time last year. The retailer also reported earnings per share of $0.93, which is a 50% increase from the $0.63 per share it reported for the same quarter last year, or a 28% increase if you don't count the $0.11 per-share charge taken as a result of closing the Home Depot locations in China. Furthermore, the company said it would raise sales expectations by 7% and hike earnings per share to $3.72 for the full year.  

Meanwhile, Best Buy reported quarterly sales of $9.36 billion, which was roughly in line with expectations ,and earnings per share of $0.18, which beat the $0.12 Wall Street expectation. But the retailer said earnings in coming quarters would take a hit due to the aggressive price cuts needed to allow Best Buy to compete with the likes of Amazon.com and other competitors. This announcement signals that although the company increased sales this past quarter, margins are going to continue to shrink in the future. Unless the price cuts dramatically increase sales, Best Buy may be in more trouble than many previously believed.  

When it comes to earnings season, the importance lies just not what a company did in the past, but in how it believes it will perform in the future. Not all companies give forward-looking guidance, but if your holding does, it is wise to pay attention to help you make a more informed buy or sell decision.

A deeper Foolish perspective

To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

The article Earnings Reports Send Home Depot and Best Buy in Opposite Directions originally appeared on Fool.com.

Fool contributor Matt Thalman owns shares of Home Depot and Amazon.com. Check back Monday through Friday as Matt explains what causing the big market movers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513The Motley Fool recommends Amazon.com and Home Depot. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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