Home Depot's Earnings Beat Sets Conservative Tone for FY24, J.P. Morgan Predicts Slowing Deterioration Ahead

J. P. Morgan analyst Christopher Horvers expressed views on Home Depot, Inc. HD third-quarter earnings results reported today.

The company reported sales growth of 6.6% year-over-year to $40.217 billion, beating the consensus estimate of $39.173 billion and adjusted EPS of $3.78, beating the consensus of $3.64.

Home Depot raised its FY24 sales guidance from $156.49 billion – $158.01 billion to $158.78 billion vs. the $157.33 billion consensus.

The company now expects Adjusted EPS of $15.10 (representing a decline of approximately 1% from $15.25 in FY23) vs. the consensus of $14.84. 

The analyst, with an Overweight rating, notes that the EPS forecast appears to be somewhat conservative.

Overall, Horvers says that there is still more to understand about the business’ current state, but excluding the 50-basis-point hurricane boost, the U.S. business showed a decline of -1.7%, an improvement from the -3.4% in the first half of 2024.

The company is essentially aligning with Street expectations for a ~-2% decline in the fourth quarter, adds the analyst.

The analyst writes that while the extended outdoor season likely helped, the pace of deterioration should continue to slow into 2025, as the share-of-wallet headwind has eased and wages grow by 3.5%-4%, supporting baseline consumption in the category.

Therefore, the Street’s +2% comp forecast for 2025 seems reasonable, adds the analyst.

Investors can gain exposure to the stock via iShares U.S. Consumer Focused ETF IEDI and VanEck Retail ETF RTH.

Price Action: HD shares are down 0.44% at $406.51 at the last check Tuesday.

Photo: Sockagphoto via Shutterstock

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