Home improvement giant Home Depot (HD) is poised to report its second-quarter financial results on Tuesday, with analysts anticipating a strong performance fueled by a potential housing market rebound and an uptick in consumer spending on home repairs. The company’s earnings announcement will be a key indicator of the health of the housing market and the broader retail sector.
Analysts are forecasting revenue of $43.38 billion for the quarter, a slight increase from the $42.92 billion reported in the same period last year. Home Depot has a strong track record of exceeding revenue expectations, having surpassed estimates in three of the past five quarters and seven of the past ten. Earnings per share are estimated to come in at $4.50, compared to $4.65 in the second quarter of 2022. Notably, Home Depot has consistently beaten earnings estimates for 16 consecutive quarters.
While some analysts express concern about potential guidance cuts, JPMorgan analyst Christopher Horvers remains bullish on the stock, maintaining an Overweight rating and raising the price target from $377 to $400. Despite lowering estimates for Home Depot’s same-store sales in the second quarter and full fiscal year due to weather headwinds and sluggish demand in the professional construction sector, Horvers highlights the company’s strong fundamentals and believes the recent decline in long-term interest rates will stimulate demand in the housing market, particularly with existing home sales at historic lows.
Foot traffic data from retail analytics firm Placer.ai supports the notion of a potential thaw in the housing market. Home Depot saw a 1.1% year-over-year increase in foot traffic during the second quarter, outperforming Lowe’s 0.6% increase. This data suggests that homeowners are opting for home repairs over moving, driving demand for home improvement products. Furthermore, the increased cross-shopping between Home Depot and Lowe’s indicates homeowners are tackling larger repair projects and comparing prices at both retailers.
Investors and analysts will be closely monitoring key metrics like sales, comparable sales, earnings, and average ticket size. An increase in average ticket size would suggest larger repair projects are being undertaken, a positive sign for Home Depot. The company’s commentary on consumer spending will also be closely scrutinized, providing insights into the trajectory of the housing market and consumer behavior.
Home Depot shares are currently trading at $345.41, within a 52-week range of $274.26 to $396.87. The stock has gained 4.7% over the past year but is down 0.3% year-to-date. Lowe’s, which reports its second-quarter earnings on August 20, is expected to be influenced by Home Depot’s performance. The upcoming earnings release from Home Depot will provide valuable insights into the health of the housing market and the home improvement industry, setting the stage for the remainder of 2023.
