Investor Confidence In Home Depot: A Review Amid Uncertain Economic Environment

Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Home Depot Inc HD with a price target of $340.
Home Depot's 1Q23 EPS of $3.82 missed the analyst’s EPS estimate of $3.85 but was slightly better than the FactSet (FS) consensus of $3.80.
The results reflected lumber deflation, unfavorable weather, particularly in California, and broad-based pressure from the tougher consumer spending environment, said the analyst.
Ticket increased 0.2%, pointing to less inflation and lower spending on big ticket categories and projects, and transactions declined 4.8% versus a decline of 8.2% last year.
Home Depot's soft 1Q23 topline performance bodes negatively for Lowe's Companies Inc LOW and other discretionary retailers that are yet to report earnings.
The company now expects FY23 comparable sales to decline 5% - 2%, reflecting the lower 1Q23 sales, further softening of demand relative to expectations, the uncertain economic environment, and slower housing market.
The analyst thinks the stock is likely to remain in the penalty box until investors gain more confidence that the business has stabilized and there will not be further reductions to the guidance in this uncertain environment.
Price Action: HD shares are trading lower by 1.67% at $283.57 on the last check Tuesday.
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