Home Depot, Inc. is a retailer of construction and home improvement goods and products. It sells building materials, home renovation products, lawn and garden products, and home décor items. The company operates in three geographic segments: the United States, Canada, and Mexico. It provides installation services for home improvements as well as tool and equipment rental.
Home Depot’s third-quarter earnings report is due on November 16, 2021. Considering the previous quarterly report, this guide will forecast the company’s Q3 earnings report.
Net income increased to $4.81 billion, or $4.53 per share, in the second quarter from $4.33 billion, or $4.02 per share, a year earlier. Revenue increased by 8.1% to $41.12 billion, up from $38.05 billion the previous year. This was higher than the $40.79 billion forecasts [1].
Customer transactions were down 5.8% compared to a year ago, while the average was up 11.3%. Year over year, sales per retail square foot increased by 5.3% to $663.05. The company’s worldwide sales increased by 4.5%, with a 3.4% increase in the United States [1].
Due to the pandemic, the Q3 2020’s robust demand environment for home-improvement projects, particularly DIY projects subsided, resulting in lower-than-expected comps. In the previous quarter, it increased by 25% in the United States [1].
One element that boosts sales is inflation. According to President and COO Ted Decker, timber prices peaked in the most recent quarter, although some types of lumber have subsequently witnessed price drops. Inflation in key commodities categories boosted Home Depot’s average ticket price by 420 basis points [2].
While Home Depot did not provide a detailed projection for 2021, CFO Richard McPhail stated during an earnings conference call that same-store sales in the United States were in line with second-quarter patterns during the first two weeks of August.
He stated, “Customer engagement and demand for home improvement is healthy. Housing remains strong, and we see a supportive environment for home improvement spending as we look out over the next several years” [2].
Property renovation retailers like Home Depot have benefited from a robust housing market, which has seen rising home values and cheap mortgage rates.
Many analysts are keeping a close eye on how long this trend will continue, with the delta variant posing the most recent headwind for retailers. In addition, concerns about the increased number of COVID cases may cause consumers to cut back on their purchasing.
Home Depot was up against difficult competition a year ago when its physical shops remained open during the pandemic, and many Americans spent money on renovation projects. In 2021, Home Depot’s sales growth is predicted to decelerate [3].
Home depot stock analysis
Quarter 3 2021 Forecast Analyst forecasts for Quarter 3 2021 earnings per share range from 3.17 to 3.68 with a consensus estimate of 3.39.
The figure below illustrates the evolution of the company’s share price and consensus price target over time. The dark blue line indicates the current price of the company. The lighter blue line indicates the consensus price for the stock.
On November 5, Home Depot hit an all-time high when it passed 374. At the time of writing, it is trading at 368. The recent low for the stock came on October 4 when it reached 324.16, the level previously seen on September 1. Since then, the stock has been trading in the green territory. On the daily chart, the price is well above the 100-day MA, and the MACD is above its neutral level, suggesting a bullish trend.
The next resistance for the stock lies at 374, which it managed to cross on November 5. If the price can break this level, it could go towards the next resistance at 390, which would be its all-time high. On the flip side, the stock’s support lies around 324. If the price breaches this level, it could further dip towards the 300 mark [4].