2023-08-14 12:50:01 ET
The Home Depot ( NYSE: HD ) is scheduled to report second-quarter earnings on August 15 before the market opens. Analysts are mostly feeling pretty good about the upcoming earnings.
Morgan Stanley, which has an Overweight rating on HD, expects results to meet expectations with a slight beat on EPS.
The average analyst estimate on HD for EPS is $4.44, which would be 12% below the second quarter of 2022. Revenue is expected to total $42.18B, down 3.68% from a year earlier, according to data compiled by Seeking Alpha.
Morgan Stanley analysts led by Simeon Gutman noted that transportation costs are easing and “there could be a modest tailwind from falling lumber prices, offset by continued supply chain investments and higher shrink costs.”
The firm said that the home improvement retailer has a “track record of expense management,” which should support margins. And HD should reiterated guidance on profit and sales.
Meanwhile, Wells Fargo is leaning positively into quarterly results, expecting the company to meet or beat expectations with full-year forecasts remaining intact.
“While a home improvement slowdown is possible (via weather, services vs goods), most indicators screen intact, and we see FY23 estimates in a good place,” Wells Fargo analysts led by Zachary Fadem wrote in a note. “In short, we still like the FY23 setup/LT upside.”
“While there's still skepticism at the margins, sentiment for the group has rebounded in recent months -- and shares have rallied accordingly,” Wells Fargo said. “Heading into Q2, we believe HD holds the edge, via a more conservative 2H bar & a more digestible FY24 setup, especially in a recovery scenario.”
Seeking Alpha analyst Bela Lakos called HD “overvalued,” while upgrading the stock to Hold from Sell.
The analyst said shares appear to be trading at a premium to the consumer discretionary sector median and to the home improvement retail sector.
“While the macroeconomic environment has indeed improved and the firm has the lead in profitability in the industry, we believe that this level of premium is not justified,” the analyst said.
Evercore ISI also isn’t ready to bet the farm on HD.
“Early ‘green shoots’ are appearing in our Home Improvement and Retail Sales lead indicators, but retail sales only just fell below the long term 3.5% trend during 2Q,” the firm noted.
“With retail sales likely to slow into 2H23 and disinflation starting to level out, we think the surprise might be in some catch up potential in defensive laggers,” Evercore analysts wrote in a note.
The firm said excess savings is down and credit card balances are growing as stress builds for more households.
“Home Improvement continues to be pressured by near-term headwinds from rising mortgage rates and falling home prices and existing home sales,” Evercore said.
Home improvement may also be shifting from larger projects better-served by HD and Lowe’s Companies ( LOW ) to small-scale projects.
Apptopia noted that home improvement heavyweights Lowe's Companies ( LOW ) and HD experienced poor new user growth rates, with the latter down -7%, while Ace Hardware soared.
Mobile app performance estimates.
Shares of HD are up 4.8% over the past 12 months.
More on Home Depot:
- Consumer discretionary stocks are given the buy call at BofA due to soft landing outlook
- Lowe's and Home Depot are cut at Telsey ahead of earnings due to soft housing market backdrop
- Home Depot: We Are More Optimistic, But Concerns Remain (Rating Upgrade)
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Home Depot set to report results; Analysts are mostly feeling good