Home Depot Q2 Earnings Preview: Will More Home Repairs, Housing Market Benefit Stock? Analyst Says 'Weather Headwinds' Playing Out

Home improvement retailer Home Depot Inc HD could see strength in consumer home repairs and a potential housing market rebound factor into second-quarter financial results and future guidance when the company reports earnings Tuesday before the market open.

Home Depot Earnings Estimates: Analysts estimate Home Depot will report second-quarter revenue of $43.38 billion, according to data from Benzinga Pro.

The company reported revenue of $42.92 billion in the comparable period last year. Home Depot has beaten analyst revenue estimates in three of the last five quarters and seven of the last 10 quarters.

Analysts estimate the company will report second-quarter earnings per share of $4.50 compared to $4.65 in last year's second quarter. Home Depot has beaten analyst estimates for earnings per share in 16 straight quarters.

Read Also: Home Depot Q2 Earnings Showdown: Bearish Trends Vs. Bullish Bets

What Analysts Are Saying: While there are concerns that Home Depot could cut guidance, JPMorgan analyst Christopher Horvers sees the stock as a high-quality name.

The analyst maintained an Overweight rating on Home Depot and raised the price target from $377 to $400.

Horvers lowered estimates for Home Depot’s same-store sales in the second quarter and full fiscal year.

"Big picture, we are lowering SSS to -3.0% given weather headwinds earlier in the quarter and lagging weakness in large Pro," Horvers said.

The analyst said second-half guidance from key Home Depot vendors also led to estimate cuts.

"Like may of our more rate-sensitive retailers that experienced a COVID boom, the flip to positive trends continues to be deferred with a softer consumer and persistently higher mortgage rates, despite share of wallet back to pre-COVID levels."

Home Depot management is optimistic on the "long-term housing dynamics,” the analyst said.

"We believe the recent reduction in long-term rates will spur demand as existing home sales remain at 40-year lows."

Data from retail data firm Placer.ai suggests that Home Depot was one of several retailers that saw foot traffic increase in the second quarter.

In the second quarter, foot traffic was up 1.1% year-over-year at Home Depot stores according to a Placer.ai report. This marks an improvement over data tracked in the first quarter, which found Home Depot foot traffic up 0.2%.

The 1.1% year-over-year increase for Home Depot stores was also ahead of Lowe's foot traffic up 0.6% year-over-year, according to the report.

Placer.ai said the data could point to a "thawing housing market" leading to more demand for home improvement items as homeowners look to home repairs over moving.

The report also saw that cross-shopping behind Home Depot and Lowe's LOW was up in the second quarter, which could mean homeowners are taking on bigger home repairs and comparing prices or buying items from both large home improvement retailers.

Here are other recent analyst ratings for Home Depot and their price targets:

• Telsey: Maintained Market Perform rating and $360 price target
• Truist: Maintained Buy rating and lowered the price target from $406 to $396
• Stifel: Maintained Hold rating and raised the price target from $374 to $380

Key Items to Watch: Key items like sales, comparable sales and earnings will be closely watched by analysts and investors Tuesday.

Another key item, which relates to the Placer.ai data, could be average ticket size.

In the first quarter, the average ticket at Home Depot was $90.68, down 1.3% year-over-year. Investors and analysts will likely want to see this figure rise and an increase could suggest that larger home repair projects are being completed.

Home Depot CEO Ted Decker cited softness in "larger discretionary projects" back in the first quarter.

Home Depot’s commentary on consumer spending could signal whether the housing market is rebounding and customers are spending more at home improvement stores or vice versa.

HD Price Action: Home Depot shares are trading at $345.41 Monday versus a 52-week trading range of $274.26 to $396.87. Home Depot shares are up 4.7% over the last year and down 0.3% year-to-date.

The home retailer trails the stock performance of peer Lowe's, which is trading 5.4% higher over the last year and is up 4% year-to-date.

Lowe's reports second-quarter results Aug. 20, and Lowe’s stock could react to any read-through from the Home Depot report.

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