Home Depot (HD) stock is struggling for direction Tuesday after the home improvement retailer reported higher-than-expected results for its second quarter but warned of weaker consumer demand.
In the three months ended July 28, Home Depot's revenue increased 0.6% year-over-year to $43.2 billion, helped by its recent acquisition of SRS Distribution, which contributed $1.3 billion of revenue in the quarter. Its earnings per share (EPS) decreased by a penny from the year-ago period to $4.67.
Comparable sales for the quarter were down 3.3%, including a 3.6% drop in the United States.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The underlying long-term fundamentals supporting home improvement demand are strong," said Home Depot CEO Ted Decker in a statement. "During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects. However, the team continued to navigate this unique environment while executing at a high level."
Home Depot's headline results beat analysts' expectations. Wall Street was anticipating revenue of $43.1 billion and earnings of $4.49 per share, according to CNBC. However, the comparable sales result was far worse than the 2.1% decline analysts had forecasted.
As a result of its performance in the first half and its recently completed acquisition of SRS Distribution, Home Depot updated its full-year outlook, which includes a 53rd week. The company now anticipates revenue growth in the range of 2.5% to 3.5% and earnings per share to increase between 1% to 3%. This compares with its previous forecast for revenue and EPS growth of approximately 1% apiece.
Home Depot also revised its comparable sales outlook, now anticipating a decline of 3% to 4%. The company said a 3% decline "implies a consumer demand environment consistent with the first half of fiscal 2024" while a 4% decline "implies incremental pressure on consumer demand." The company had previously forecasted comparable sales to decline approximately 1%.
Is Home Depot stock a buy, sell or hold?
Home Depot has struggled on the price charts this year, up a slight 1% on a total return basis (price change plus dividends) vs the S&P 500's 13% return. Still, Wall Street is bullish on blue chip stock.
According to S&P Global Market Intelligence, the average analyst target price for HD stock is $383.08, representing implied upside of more than 10% to current levels. Meanwhile, the consensus recommendation is a Buy.
Financial services firm Jefferies is one of the more bullish outfits on the Dow Jones stock with a Buy rating and $426 price target.
"A noisy quarter given the six-week sales contribution from recently acquired SRS, but nonetheless, the underlying trend is clear: higher interest rates and greater macroeconomic uncertainty pressured weaker spend across home improvement projects during the quarter," Jefferies analyst Jonathan Matuszewski said in a note this morning.
Jefferies' $426 price target sits almost 23% above HD's current price.
Related Content
-
Does My Car Insurance Cover Rental Cars?Is it safe to decline the extra coverage car rental companies offer you when booking? Here's what you need to know.
-
Outsmarting the AI Job Algorithm: Why Older Women Need a StrategyWhen you're job hunting, AI may undermine your best efforts. Here's how older women can throw a wrench in the algorithm.
-
I'm an Investment Adviser: Here's Why You Should Resist a Zero-Down MortgageWhile it's certainly enticing, a zero-down mortgage comes with significant risks, especially if home values decline or you want to refinance.
-
I'm Embarrassed to Ask: What Is a Life Insurance Trust?Life insurance trusts, particularly irrevocable life insurance trusts (ILITs), can minimize estate taxes and protect your heir's inheritance.
-
Are Your Employees Quietly Cracking? How to Repair the Cracks Before Everything BreaksSome employees who are unable to change jobs due to economic conditions are doing only the bare minimum, leading to decreased work quality and team morale.
-
Headed for the Retirement Red Zone? This Eight-Step Game Plan Helps to Avoid FumblesThese strategies help safeguard your nest egg and ensure long-term financial success during the five years before retirement and the five years after.
-
I'm a Financial Planner: This Is How You Can Get Started With RMDsThe IRS will come knocking for its share of your tax-deferred retirement savings when you hit 73, but planning ahead for RMDs will ensure you're ready.
-
How Will You Replace Your Paycheck in Retirement? A Financial Adviser's Tips on Income PlanningBills don't stop once you retire — and you can't expect your Social Security checks to cover them all. Don't risk running out of money. Instead, make a plan.
-
From Pets to Paintings: The Little Things That Can Cause Big Estate TroubleSentimental items might have little monetary value, but their disposition can cause hurt feelings. Talking about who wants what and labeling items can help.
-
The Clock Is Ticking: Take Advantage of These Retirement Tax Benefits While They LastRecent tax changes, including an extra $6,000 deduction for those 65 and older, present a golden opportunity for retirees to reduce their tax bills.
