E14.13. Comparing Simple Forecasts with Analysts' Forecasts: Home Depot, Inc. (Medium) Home Depot, the warehouse retailer, traded at $42 per share when its 2005 financial state- ments were published. Analysts were forecasting $2.59 earnings per share for 2006 and $2.93 for 2007. There were 2,185 million shares outstanding at the time. Below are income statements for fiscal years 2003-2005, along with information extracted from balance sheets. Home Depot's combined federal and state statutory tax rate is 37.7 percent. Develop forecasts of earnings for 2006 and 2007 from the financial statements. How close are your forecasts to the analysts' forecasts? THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Earnings In milions except per-share number Fiscal Year Ended January 30, February 1. February 2, 2005 2004 2003 Net sales $73,094 $64,816 $58,247 Cost of merchandise sold 48,664 44,236 40,139 Gross profit 24,430 20,580 18,108 Operating expenses: Selling and store operating 15,105 12,588 11,276 General and administrative 1,399 1,146 1,002 Total operating experses 16,504 13,734 12.278 Operating income 7,926 6,846 5,830 Interest income (expense): Interest and investment income 56 59 79 Interest expense (70) (62) (37) Interest, net (14) 43) 42 Earings before provision for income taxes 7,912 6,843 5,872 Provision for income taxes 2,911 2,539 2,208 Net earnings $ 5,001 $ 4,304 $ 3,664 Weighted-average common shares 2,207 Basic earnings per share $2.27 Diluted weighted-average common shares Diluted earnings per share 2,216 2,283 $1.88 2,289 $ 2.26 $ 1.88 2,336 $1.57 2,344 $ 1.56 From the balance sheet (in millions): 2005 2004 2003 2002 Net operating assets $23,833 $20,886 $18,820 $16.753 Net financial assets 325 1,521 982 1,329 Common equity 24,158 22,407 19,802 18,082