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Home Depot (HD) Up 2.5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Home Depot (HD - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Home Depot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Home Depot Q1 Earnings & Sales Decline Y/Y
Home Depot has reported dismal first-quarter fiscal 2023 results, with the top and bottom lines declining year over year. Earnings surpassed the Zacks Consensus Estimate, while sales missed the same. Results have been impacted by a more broad-based pressure across the business, driven by softened demand versus expectations. A deflation in lumber prices and unfavorable weather have also hurt the results.
Home Depot's earnings of $3.82 per share declined 6.6% from $4.09 registered in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of $3.80.
Net sales declined 4.2% to $37,257 million from $38,908 million in the year-ago quarter. The metric also missed the Zacks Consensus Estimate of $38,510 million. Lower-than-expected sales mainly resulted from lumber deflation and adverse weather conditions, primarily in the Western division, which was impacted by extreme weather in California.
Home Depot's comparable sales fell 4.5% in the reported quarter. The company’s comparable sales in the United States declined 4.6%. Comps were impacted by a decline in customer transactions, partly offset by a rise in average ticket. Customer transactions declined 4.8% year over year, while the average ticket rose 0.2%. Sales per retail square foot were down 4.7%.
In dollar terms, the gross profit dipped 4.5% to $12,557 million from $13,145 million in the year-ago quarter. The operating income fell 6.4% year over year to $5,929 million.
Selling, general and administrative expenses of $6,355 million declined 3.9% from the $6,610 million reported in the year-ago quarter.
Other Updates
Home Depot ended first-quarter fiscal 2023 with cash and cash equivalents of $1,260 million, long-term debt (excluding current installments) of $40,915 million, and shareholders' equity of $362 million. In first-quarter fiscal 2023, the company generated $5,614 million of net cash from operations.
Fiscal 2023 View
Driven by the impacts of lumber deflation and weather on first-quarter fiscal 2023 results, as well as expectations of softened consumer demand, Home Depot lowered its sales and earnings view for fiscal 2023.
Home Depot anticipates sales and comparable sales to decline 2-5% year over year in fiscal 2023, compared with the prior mentioned view of flat year-over-year results. The operating margin rate is estimated at 14-14.3% compared with the 14.5% mentioned earlier.
The company expects an effective tax rate of 24.5% in fiscal 2023. Interest expenses are likely to be $1.8 billion in fiscal 2023. HD estimates earnings per share to move down 7-13% year over year in fiscal 2023 versus a mid-single-digit decline stated earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -5.61% due to these changes.
VGM Scores
Currently, Home Depot has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Home Depot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Home Depot belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Builders FirstSource (BLDR - Free Report) , has gained 0.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Builders FirstSource reported revenues of $3.88 billion in the last reported quarter, representing a year-over-year change of -31.7%. EPS of $2.96 for the same period compares with $3.90 a year ago.
Builders FirstSource is expected to post earnings of $2.58 per share for the current quarter, representing a year-over-year change of -58.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Builders FirstSource. Also, the stock has a VGM Score of A.
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Home Depot (HD) Up 2.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Home Depot (HD - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Home Depot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Home Depot Q1 Earnings & Sales Decline Y/Y
Home Depot has reported dismal first-quarter fiscal 2023 results, with the top and bottom lines declining year over year. Earnings surpassed the Zacks Consensus Estimate, while sales missed the same. Results have been impacted by a more broad-based pressure across the business, driven by softened demand versus expectations. A deflation in lumber prices and unfavorable weather have also hurt the results.
Home Depot's earnings of $3.82 per share declined 6.6% from $4.09 registered in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of $3.80.
Net sales declined 4.2% to $37,257 million from $38,908 million in the year-ago quarter. The metric also missed the Zacks Consensus Estimate of $38,510 million. Lower-than-expected sales mainly resulted from lumber deflation and adverse weather conditions, primarily in the Western division, which was impacted by extreme weather in California.
Home Depot's comparable sales fell 4.5% in the reported quarter. The company’s comparable sales in the United States declined 4.6%. Comps were impacted by a decline in customer transactions, partly offset by a rise in average ticket. Customer transactions declined 4.8% year over year, while the average ticket rose 0.2%. Sales per retail square foot were down 4.7%.
In dollar terms, the gross profit dipped 4.5% to $12,557 million from $13,145 million in the year-ago quarter. The operating income fell 6.4% year over year to $5,929 million.
Selling, general and administrative expenses of $6,355 million declined 3.9% from the $6,610 million reported in the year-ago quarter.
Other Updates
Home Depot ended first-quarter fiscal 2023 with cash and cash equivalents of $1,260 million, long-term debt (excluding current installments) of $40,915 million, and shareholders' equity of $362 million. In first-quarter fiscal 2023, the company generated $5,614 million of net cash from operations.
Fiscal 2023 View
Driven by the impacts of lumber deflation and weather on first-quarter fiscal 2023 results, as well as expectations of softened consumer demand, Home Depot lowered its sales and earnings view for fiscal 2023.
Home Depot anticipates sales and comparable sales to decline 2-5% year over year in fiscal 2023, compared with the prior mentioned view of flat year-over-year results. The operating margin rate is estimated at 14-14.3% compared with the 14.5% mentioned earlier.
The company expects an effective tax rate of 24.5% in fiscal 2023. Interest expenses are likely to be $1.8 billion in fiscal 2023. HD estimates earnings per share to move down 7-13% year over year in fiscal 2023 versus a mid-single-digit decline stated earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -5.61% due to these changes.
VGM Scores
Currently, Home Depot has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Home Depot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Home Depot belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Builders FirstSource (BLDR - Free Report) , has gained 0.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Builders FirstSource reported revenues of $3.88 billion in the last reported quarter, representing a year-over-year change of -31.7%. EPS of $2.96 for the same period compares with $3.90 a year ago.
Builders FirstSource is expected to post earnings of $2.58 per share for the current quarter, representing a year-over-year change of -58.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Builders FirstSource. Also, the stock has a VGM Score of A.