Home Depot Q2 Earnings Preview: Earnings Estimates, What Analysts Are Saying And Key Metrics To Watch

Leading home improvement retailer Home Depot Inc HD will report second quarter financial results before market open Tuesday.

Here’s a look at what analysts are expecting from the company and key aspects to watch.

Earnings Estimates: Analysts are expecting Home Depot to report revenue of $42.25 billion in the second quarter, according to data from Benzinga Pro.

The revenue total would be down from last year’s $43.79 billion reported in the comparable quarter and up from the first quarter total of $37.26 billion.

Home Depot has missed analysts’ estimates for revenue in each of the last two quarters, after previously beating estimates in seven straight quarters.

Analysts see the company reporting earnings per share of $4.44 in the second quarter, compared to $5.05 in the second quarter of last year and $3.82 reported in the most recent first quarter.

The company has beaten earnings per share estimates in nine straight quarters.

Related Link: Home Depot Reaffirms FY23 Guidance, Provides Market Stability Outlook 

What Analysts Are Saying: Ahead of the second quarter earnings, analysts have been mixed on what’s to come for the stock, with changes in ratings and price targets.

Home Depot and Lowe’s Companies LOW were both downgraded by Telsey Advisory Group earlier this month from Outperform to Market Perform, as reported by Investing.com

Home Depot and Lowe’s could “experience a slightly steeper slowdown related to the weak housing market trends, consumers remaining cautious with spending, especially on big ticket items and projects, and continued normalization from the strong COVID-19 and government stimulus related gains from past three years,” analyst Joseph Feldman said.

Feldman, who has a price target of $315 for Home Depot, said a stabilizing housing market could create a difficult operating environment for the stock.

Here’s a look at other analyst ratings and price targets over the last month:

Oppenheimer analyst Timothy Horan has an Outperform rating and a price target of $360.

Citigroup analyst Steven Zaccone has a Buy rating and raises the price target from $327 to $375.

Argus Research analyst Chris Graja has a Buy rating and lowers the price target from $400 to $350.

Truist Securities analyst Scott Ciccarelli has a Buy rating and raises the price target from $318 to $348.

Key Items to Watch: Home Depot’s earnings report could provide clues for investors and analysts about how the housing sector is performing.

The company had beaten estimates for revenue and seen impressive growth for several years, and could see tough year-over-year comparisons to beat.

“After a three-year period of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market,” CEO Ted Decker said during the company’s first quarter earnings.

Decker cited unfavorable weather in the first quarter as a potential factor that may attract the attention of investors and analysts.

The company’s fiscal 2023 guidance calls for sales to be down 2% to 5% year-over-year. Investors will like to see this guidance reaffirmed or raised, as lowered guidance could send shares lower.

In June, Home Depot provided a market outlook with sales growth of 3% to 4% annually expected in the future along with mid-to-high single digit earnings per share growth.

While 2023 could be a down year for Home Depot, commentary from the company for the future could paint a bullish case for investors and analysts ahead.

“Once the home improvement market returns to stability, we expect to see sales growth consistent with how our business has performed in the past,” Home Depot Chief Financial Officer Richard McPhail said.

Other areas that investors and analysts may monitor from the second quarter include customer transactions per ticket, shifts to do-it-yourself projects over professional services, the backlog of professional services and any trade-downs to cheaper products.

HD Price Action: Home Depot shares trade at $329.87 versus a 52-week trading range of $265.63 to $346.95.

Shares of the home retailer are up 4.5% year-to-date in 2023 and up 4.8% over the last year.

Shares of rival Lowe’s are up 13.3% year-to-date in 2023 and up 8.4% over the last year.

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