Home Depot Earnings Expected To Fall For The First Time In Three Years
Home Depot (HD) reports first-quarter financials Tuesday, with the Dow Jones stock giving investors clues about whether consumers are spending more money on home remodeling projects despite recession fears.
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While home improvement retailers were Covid pandemic winners, more recently, they found favor as defensive plays amid inflation and global recession fears. In the early part of 2023, Home Depot rallied along with other housing-related plays as mortgage rates came off highs.
But Home Depot and rival home improvement retailer Lowe's (LOW) have stumbled since early February. Homebuilder stocks, though, have rallied strongly even as their current earnings fall sharply. Lowe's reports next week.
On Friday, Baird analyst Peter Benedict lowered the price target on the Dow Jones stock to 320, down from 340. Benedict maintained an "Outperform" rating on the shares with an eye toward seasonal sales and "sequential deceleration in demand indicators."
Last week, Citigroup (C) analyst Steven Zaccone lowered the firm's price target on Home Depot stock to 327 from 332. The analyst wrote he expects a Q1 same-store-sales miss at both Home Depot and Lowe's. Zaccone based that on an "unfavorable start" to spring.
Morgan Stanley (MS) Simeon Gutman wrote on Thursday that Home Depot stock risk/reward "looks modestly positive."
"It's possible HD shares could be bought on a guidance cut," Gutman wrote, adding there is current uncertainty in the housing market.
"It's possible the housing market undergoes a multiyear digestion, in which case the stock may tread water until turnover and prices stabilize and there is a clearer path to top-line growth," he wrote.
HD shares edged down 0.88% to 287.90 Monday during market trade. The Dow Jones stock is below its 50-day and 200-day lines.
Home Depot Stock: Earnings
Estimates: Wall Street predicts Home Depot earnings will fall 7% to $3.80 per share in Q1, the first year-over-year decline in three years. Analysts see revenue increasing 1% to $38.31 billion. Same-store sales are expected to drop 1.6%.
Results: Check Tuesday morning.
In late February, Home Depot turned in mixed fourth-quarter financial results. The Dow Jones stock posted earnings per share of $3.30 vs. FactSet consensus for $3.28. It reported revenue of $35.83 billion vs. $35.97 billion expected.
Year over year, Home Depot earnings rose 2.8% and revenue edged up 0.3%. That marked the second consecutive quarter of slowing profit and sales growth.
For fiscal year 2023, the Dow Jones stock expects EPS to decline in the mid-single digits. In February, it guided for flat sales and comparable-sales growth. Meanwhile, analyst consensus is for Home Depot earnings per share declining 5% to $15.72 per share with sales off 1% to $156.29 billion.
"While we expect this to be a year of moderation in demand for home improvement, we believe that the long-term underpinnings of our market remain strong, and we are well positioned to leverage our distinct competitive advantages to capitalize on compelling growth opportunities in our space," CEO Ted Decker told investors in February.
The Dow Jones stock ranks fifth in IBD's Wholesale-Building Products industry group. Home Depot stock has a 73 Composite Rating out of 99. HD also has a 44 Relative Strength Rating. The EPS Rating for the Dow Jones stock is 88 out of 99.
Dow Jones Stock Home Depot Rival Lowe's Is On Deck
Lowe's follows Dow Jones giant Home Depot late on May 23. Wall Street forecasts Lowe's earnings share dipping 2% to $3.45 with revenue sliding 8% to $21.68 billion.
On March 1, Lowe's reported Q4 earnings accelerating for the third quarter in a row, jumping 28% to $2.28 per share as revenue climbed 5.2% to $22.445 billion.
The adjusted earnings results excluded pretax transaction costs associated with selling its Canadian retail business, after offloading it to private-equity firm Sycamore Partners for $400 million in cash in November. Lowe's comparable sales fell 1.5% for the fourth quarter while U.S. comparable sales dipped 0.7%. FactSet projected flat growth year-over-year.
For fiscal 2023, Lowe's forecasts earnings to range from $13.60 to $14 per share on $88 billion to $90 billion in total sales. For full-year 2022, Lowe's earnings were $13.76 per share on $97 billion in sales. Management expects slower foot traffic to continue throughout the year. The home retailer sees comparable sales being flat to down 2% year-over-year.
Lowe's stock fell 0.90% to 201.44 Monday, dropping below its 50-day and 200-day line.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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Source: Investor's Business Daily
