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Will Continued Inflation Hurt Home Depot's (HD) Q3 Earnings?
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Home Depot, Inc. (HD - Free Report) is set to report third-quarter fiscal 2023 results on Nov 14, before market open. Its top and bottom lines are likely to have declined in the to-be-reported quarter. The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings of $3.82 per share suggests a decline of 9.9% from the year-ago period’s reported figure. The consensus estimate has moved up 0.5% in the past 30 days.
The consensus mark for quarterly revenues is pegged at $37.7 billion, indicating a decline of 3.1% from the figure reported in the year-ago quarter.
In the last reported quarter, the company delivered an earnings surprise of 4.3%. The leading home improvement retailer recorded an earnings surprise of 2.22% in the last four quarters, on average.
Home Depot’s third-quarter fiscal 2023 performance is likely to have been affected by soft consumer spending trends due to rising inflation, normalized transactions and continued investments to capture market share. On the last reported quarter’s earnings call, the company noted that transactions gradually normalized as consumer spending shifted from goods to services.
The company has been witnessing continued pressure in some big-ticket, discretionary categories, a trend which started in fourth-quarter fiscal 2022. The deflation of core commodity categories, particularly in lumber prices, has been affecting the top-line performance. We expect this trend to have continued in the fiscal third quarter, affecting its sales results.
Moreover, the company’s fiscal third-quarter results are expected to reflect the continued negative impacts of lumber deflation, leading to soft comps. In the fiscal second quarter, it witnessed a significant decline in lumber prices relative to the year-ago quarter. The continuation of these trends is expected to have impacted comps in the to-be-reported quarter.
Additionally, deceleration across many departments and pressures in several big-ticket discretionary categories have been weighing on the comps performance. This is also expected to have affected the comps performance in the to-be-reported quarter.
We expect comps for the fiscal third quarter to decline 4.9% mainly on lumber deflation, continued deceleration across many departments and pressures in several big-ticket discretionary categories. Deflation from core commodity categories, primarily in lumber, is expected to have negatively impacted the company’s average ticket growth in the fiscal third quarter.
Our model predicts a 0.2% increase in average ticket in the fiscal third quarter, with a 3.9% decline in number of customer transactions.
However, Home Depot has been seeing significant benefits from the execution of its "One Home Depot" plan focused on expanding the supply chain, technology investments and digital enhancements. The company’s interconnected retail strategy and underlying technology infrastructure have consistently been boosting web traffic for the past few quarters. This is expected to have aided digital sales in the to-be-reported quarter.
HD is expected to have witnessed growth in the Pro and DIY customer categories, and digital momentum in the fiscal third quarter.
Zacks Model
Our proven model does not conclusively predict an earnings beat for Home Depot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Home Depot has a Zacks Rank #4 (Sell) and an Earnings ESP of +0.39%.
Stocks With the Favorable Combination
Here are some companies you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat:
The TJX Companies (TJX - Free Report) currently has an Earnings ESP of +2.60% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for TJX’s quarterly revenues is pegged at $13.1 billion, which suggests growth of 7.3% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for TJX’s earnings has been unchanged at 97 cents per share in the past 30 days. The consensus estimate indicates 12.8% growth from the year-ago quarter’s reported figure.
Ross Stores (ROST - Free Report) currently has an Earnings ESP of +2.40% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 numbers. The consensus mark for ROST’s quarterly earnings has been unchanged at $1.21 per share in the past 30 days. The consensus estimate suggests 21% growth from the year-ago quarter’s reported number.
The Zacks Consensus Estimate for Ross Stores’ quarterly revenues is pegged at $4.83 billion, which suggests growth of 5.8% from the figure reported in the prior-year quarter.
Walmart (WMT - Free Report) currently has an Earnings ESP of +0.21% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 results. The consensus mark for WMT’s quarterly revenues is pegged at $159.1 billion, which suggests 4.1% growth from the figure reported in the prior-year quarter.
The consensus mark for WMT’s quarterly earnings has moved up by a penny in the past seven days to $1.51 per share. The consensus estimate suggests growth of 0.7% from the year-ago quarter.
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Will Continued Inflation Hurt Home Depot's (HD) Q3 Earnings?
Home Depot, Inc. (HD - Free Report) is set to report third-quarter fiscal 2023 results on Nov 14, before market open. Its top and bottom lines are likely to have declined in the to-be-reported quarter. The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings of $3.82 per share suggests a decline of 9.9% from the year-ago period’s reported figure. The consensus estimate has moved up 0.5% in the past 30 days.
The consensus mark for quarterly revenues is pegged at $37.7 billion, indicating a decline of 3.1% from the figure reported in the year-ago quarter.
In the last reported quarter, the company delivered an earnings surprise of 4.3%. The leading home improvement retailer recorded an earnings surprise of 2.22% in the last four quarters, on average.
The Home Depot, Inc. Price and EPS Surprise
The Home Depot, Inc. price-eps-surprise | The Home Depot, Inc. Quote
Key Factors to Note
Home Depot’s third-quarter fiscal 2023 performance is likely to have been affected by soft consumer spending trends due to rising inflation, normalized transactions and continued investments to capture market share. On the last reported quarter’s earnings call, the company noted that transactions gradually normalized as consumer spending shifted from goods to services.
The company has been witnessing continued pressure in some big-ticket, discretionary categories, a trend which started in fourth-quarter fiscal 2022. The deflation of core commodity categories, particularly in lumber prices, has been affecting the top-line performance. We expect this trend to have continued in the fiscal third quarter, affecting its sales results.
Moreover, the company’s fiscal third-quarter results are expected to reflect the continued negative impacts of lumber deflation, leading to soft comps. In the fiscal second quarter, it witnessed a significant decline in lumber prices relative to the year-ago quarter. The continuation of these trends is expected to have impacted comps in the to-be-reported quarter.
Additionally, deceleration across many departments and pressures in several big-ticket discretionary categories have been weighing on the comps performance. This is also expected to have affected the comps performance in the to-be-reported quarter.
We expect comps for the fiscal third quarter to decline 4.9% mainly on lumber deflation, continued deceleration across many departments and pressures in several big-ticket discretionary categories. Deflation from core commodity categories, primarily in lumber, is expected to have negatively impacted the company’s average ticket growth in the fiscal third quarter.
Our model predicts a 0.2% increase in average ticket in the fiscal third quarter, with a 3.9% decline in number of customer transactions.
However, Home Depot has been seeing significant benefits from the execution of its "One Home Depot" plan focused on expanding the supply chain, technology investments and digital enhancements. The company’s interconnected retail strategy and underlying technology infrastructure have consistently been boosting web traffic for the past few quarters. This is expected to have aided digital sales in the to-be-reported quarter.
HD is expected to have witnessed growth in the Pro and DIY customer categories, and digital momentum in the fiscal third quarter.
Zacks Model
Our proven model does not conclusively predict an earnings beat for Home Depot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Home Depot has a Zacks Rank #4 (Sell) and an Earnings ESP of +0.39%.
Stocks With the Favorable Combination
Here are some companies you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat:
The TJX Companies (TJX - Free Report) currently has an Earnings ESP of +2.60% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for TJX’s quarterly revenues is pegged at $13.1 billion, which suggests growth of 7.3% from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TJX’s earnings has been unchanged at 97 cents per share in the past 30 days. The consensus estimate indicates 12.8% growth from the year-ago quarter’s reported figure.
Ross Stores (ROST - Free Report) currently has an Earnings ESP of +2.40% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 numbers. The consensus mark for ROST’s quarterly earnings has been unchanged at $1.21 per share in the past 30 days. The consensus estimate suggests 21% growth from the year-ago quarter’s reported number.
The Zacks Consensus Estimate for Ross Stores’ quarterly revenues is pegged at $4.83 billion, which suggests growth of 5.8% from the figure reported in the prior-year quarter.
Walmart (WMT - Free Report) currently has an Earnings ESP of +0.21% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 results. The consensus mark for WMT’s quarterly revenues is pegged at $159.1 billion, which suggests 4.1% growth from the figure reported in the prior-year quarter.
The consensus mark for WMT’s quarterly earnings has moved up by a penny in the past seven days to $1.51 per share. The consensus estimate suggests growth of 0.7% from the year-ago quarter.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.