Home Depot Earnings (HD) Q1: What to Expect

HHome Depot (HD) has been hit hard so far this year, falling more than 30% year-to-date, lagging the S&P 500 index’s 17% decline. is no surprise, as cycles of rising interest rates have historically hampered home improvement stocks.

Rising costs for building materials have also put pressure on home improvement space. Shortages of building materials have also been a concern. Can the company manage these headwinds profitably in the coming quarters? And what will its growth profile look like if the housing market cools? These are some of the questions investors will want to know when the company reports results for the first quarter of fiscal 2022 before the opening bell on Tuesday.

That said, confidence remains in the housing market, which held up relatively well, despite rising mortgage rates. And while the company faces tougher year-over-year comparisons, Home Depot’s longer-term story remains intact. In addition to expanding its product offerings and improving its delivery and fulfillment capabilities, where it aims to increase its two-day and one-day shipping initiatives, The Home Depot has invested heavily in its digital capabilities through to its One Home Depot program. .

From an execution perspective, the company has built a strong balance sheet beating consensus estimates, beating both revenue and earnings estimates for the past nine quarters. During the last quarter, management shared its long-term goal of reaching $200 billion in sales with improved in-store productivity and reduced costs. Nevertheless, the company’s forecast on Tuesday will give an idea of ​​the realism of these forecasts.

In the three months ending March, the Atlanta, Georgia-based company is expected to earn $3.68 a share on revenue of $36.65 billion. That compares to the year-ago quarter where earnings were $3.86 per share on revenue of $37.5 billion. For the full year, ending December, earnings of $16.10 per share would be up 3.67% year-over-year from $15.53 per share, while annual revenue of $153.91 billion would increase 1.8% year over year.

One of the main effects of the pandemic has been increased demand for homeownership as renters seek to leave crowded cities. Home ownership has led to an increase in demand for home improvement products and services. However, the pandemic has created a massive push in these areas. The Home Depot has capitalized by increasing its market share, but the revenue generated by the pandemic has already been spent, as evidenced by the pessimistic projected 1.8% revenue growth for fiscal year 2022.

Additionally, the fact that Home Depot’s fiscal year earnings per share are expected to grow only 3.6%, or 25 percentage points less than fiscal 2021, highlights the slowdown in growth. In the fourth quarter, The Home Depot delivered results that easily exceeded expectations in terms of both sales and earnings, thanks to an increase of more than 8% in same-store sales, against a consensus of 5.3%. Fourth-quarter net profit was also strong, coming in at $3.35 billion, up from $2.86 billion a year ago.

Other key metrics such as sales per retail square foot rose 8.3% to $571.79. However, during the quarter, customer transactions fell 3.4%, despite the average ticket rising 12.4% to $85.11. The decline in the total number of transactions also occurred in the previous quarter, suggesting that some consumers were feeling inflationary pressures. And with rising interest rates and a noticeable jump in inflation, will consumers continue to cut spending in the coming quarters? On Tuesday, investors will want to see if the Home Depot forecast confirms whether “home improvement fatigue” should be a real concern.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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