Home Depot Inc. (HD) is off to a strong start on Tuesday, with its stock trading higher in pre-market trading. The home improvement giant exceeded its third-quarter earnings estimates and provided an optimistic outlook for the full year 2024, fueling investor enthusiasm.
The company reported a 6.6% year-over-year increase in third-quarter sales, reaching $40.217 billion, surpassing the consensus estimate of $39.173 billion. While customer transactions dipped slightly by 0.2%, comparable sales, which measure sales at stores open for at least a year, decreased by 1.3%, with U.S. comparable sales declining 1.2%.
Despite the slight dip in comparable sales, Home Depot’s strong performance was driven by a combination of factors, including improved weather conditions that boosted sales of seasonal goods and outdoor project materials. Additionally, the company experienced incremental sales related to hurricane-related demand.
Home Depot’s gross profit for the quarter rose by 5.4% year-over-year to $13.425 billion, representing a margin of 33.4%. However, this margin was down 40 basis points year-over-year. The operating margin stood at 13.5%, down 86 basis points, leading to a 0.22% decrease in operating income to $5.418 billion. The adjusted operating margin also declined to 13.8% from 14.5% year-over-year. Operating expenses rose by 9.2% year-over-year, reaching $8.01 billion. Adjusted earnings per share (EPS) for the quarter came in at $3.78, a 1.8% decrease year-over-year but exceeding the consensus estimate of $3.64.
Home Depot’s average ticket for the third quarter was $88.65, marking a 0.8% decrease. Sales per retail square foot fell by 2.1% to $582.97.
As of October 27, Home Depot held $1.531 billion in cash and equivalents. The company generated an operating cash flow of $15.139 billion for the first nine months of the fiscal year, compared to $16.439 billion in the same period last year. At the end of the third quarter, Home Depot operated 2,345 retail stores and over 780 branches across the U.S., Canada, and Mexico.
“While macroeconomic uncertainty remains, our third-quarter performance exceeded our expectations. As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects as well as incremental sales related to hurricane demand,” commented Ted Decker, chair, president, and CEO.
Looking ahead, Home Depot has raised its full-year sales guidance from $156.49 billion – $158.01 billion to $158.78 billion, surpassing the consensus estimate of $157.33 billion. The company expects comparable sales to decline approximately 2.5% for the full year, compared to its prior expectation of a 3% to 4% decline.
Home Depot now anticipates adjusted EPS of $15.10 for the full year, representing a decline of approximately 1% from $15.25 in fiscal year 2023. This exceeds the consensus estimate of $14.84. The company projects a gross margin of around 33.5% and an adjusted operating margin of 13.8%.
In pre-market trading, HD shares were up by 1.56% at $414.65, reflecting investor optimism fueled by the company’s strong performance and positive outlook.
