Home Depot's Mixed Q4 Results And Cautious 2024 Outlook: Goldman Sachs Analyst Weighs In

Goldman Sachs analyst Kate McShane reiterated a Buy rating on Home Depot, Inc HD with a price target of $393.

Home Depot reported fourth-quarter fiscal 2023 EPS of $2.82, above McShane’s estimate of $2.79 and Wall Street’s estimate of $2.77. 

Net sales decreased 2.9% year-on-year to $34.8 billion versus McShane, and the Wall Street consensus of $34.8 billion and $34.6 billion as comparable sales decreased 3.5% Y/Y, below McShane’s estimate of -3.0% and consensus of -3.3%. 

During the quarter, Home Depot experienced declines in both average tickets (-1.3% Y/Y) and transactions (-1.7% Y/Y), and McShane noted that comparable sales in the U.S. decreased by 4.0% Y/Y. 

Home Depot’s operating margin decreased 135 bps Y/Y to 11.9% against McShane and the Wall Street estimate of 11.8% and 11.9% as gross margin decreased 20 bps Y/Y to 33.1% while total operating expenses as a % of sales increased 115 bps Y/Y to 21.2%.

Management provided fiscal 2024 guidance, including sales growth of approximately 1.0% (vs. consensus of +1.5%), a 1.0% decline in comparable sales (vs. consensus of +0.1%), gross margin of 33.9% (vs. consensus of 33.4%), operating margin of 14.1% (vs. consensus of 14.2%), and EPS growth of approximately 1.0% (vs. consensus of +3.3%). 

Further, McShane noted that Home Depot’s guidance includes the impact of a 53rd week (excluding comp), which will likely add ~$2.3 billion in sales and $0.30 to EPS.

McShane expects an adverse reaction to the fourth-quarter print as fiscal 2024 guidance for sales and EPS growth came below consensus. On the conference call, the analyst will seek commentary regarding ticket and transaction expectations for fiscal 2024, quarter-to-date trends, recent demand, Pro activity and the backlog, inventory levels, commentary regarding the housing market, and additional expectations for fiscal 2024.

Price Action: HD shares closed higher by 0.06% at $362.57 on Tuesday.

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