Home Depot's Revised Guidance May Not Hold: 4 Analysts Review Q1 Results, Outlook

Shares of Home Depot Inc HD spiked in early trading on Wednesday, despite the company reporting the worst revenue miss in over two decades.

The report came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

• Telsey Advisory analyst Joseph Feldman maintained an Outperform rating, while reducing the price target from $340 to $315.
• Morgan Stanley analyst Simeon Gutman reiterated an Overweight rating, while reducing the price target from $340 to $320.
• KeyBanc Capital Markets analyst Bradley Thomas reaffirmed a Sector Weight rating on the stock.
• Raymond James analyst Bobby Griffin maintained a Market Perform rating.

Check out other analyst stock ratings.

Telsey Advisory

“Home Depot's 1Q23 EPS were inline but still down ~7% YoY and would have been worse if not for better-than-expected profitability, partially helped by a one-time margin tailwind from a legal settlement,” Feldman wrote.

“Sales significantly missed expectations,” the analyst added. Near-term pressures may keep the stock “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."

Morgan Stanley

While Home Depot’s updated earnings guidance appears “sufficiently de-risked,” there could be downside to revenue estimates for the second half of the year, Gutman said in a note.

“The implied step up in market share in ’23 (if our math is correct) gives us some pause, but similar to potentially weaker 2H'23sales, could be offset by lower costs,” he added.

KeyBanc Capital Markets

Home Depot reported mixed results for the first quarter, Thomas said. “HD results point to slowing home improvement spending, with 1Q comps below expectations and lowered 2023 guidance,” he added.

“Looking ahead, we continue to see risk for the industry from elevated mortgage rates, soft housing turnover, falling home prices, and core commodity deflation,” the analyst further stated.

Raymond James

“Although we are not massively negative on the U.S. housing industry and still see some favorable aspects for home improvement demand, we expect further moderation in home improvement spending throughout 2023 following record home improvement growth the past few years,” Griffin said.

“Furthermore, this outlook is accompanied by sizable lumber deflation in 1H23 and lapping strong demand for large projects and big-ticket items (comps above $1,000 declined below company average),” he added.

HD Price Action: Shares of Home Depot had risen by 2.52% to $289.47 at the time of publishing on Wednesday.

Image courtesy of Home Depot