Home Depot (NYSE: HD) is set to announce its fiscal first-quarter results on May 14. Analysts expect the company to exceed market expectations slightly, with revenues and earnings likely to outperform. The stock has remained stagnant in early 2024 due to a drop in lumber prices and weakening demand, as consumer spending shifts towards services rather than goods. Despite these challenges, Home Depot anticipates a 1.0% decline in comparable sales for FY’24 and plans to open 12 new stores. The company also expects a gross margin of 33.9% and an operating margin of 14.1% for 2024. Generating $16.4 billion in free cash flow for FY’23, HD’s diversity in catering to professional contractors has been a significant advantage over its competitor, Lowe’s.
While Home Depot’s stock has climbed 30% from early 2021 to around $346, its performance has been inconsistent, with returns of 56% in 2021, -24% in 2022, and 10% in 2023. During the same period, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating HD’s underperformance in 2022 and 2023. In today’s economic climate, where even heavyweights in the Consumer Discretionary sector struggle to beat the S&P, Home Depot faces uncertainties linked to high oil prices and elevated interest rates. Could the company replicate its past underperformance or see a significant boost in the coming months?
Trefis forecasts Home Depot’s valuation to be $376 per share, nearly 9% higher than the current market price. The company’s Q1 2024 revenues are estimated to be around $37.1 billion, surpassing consensus estimates slightly. In Q4, Home Depot reported a 3% y-o-y decline in revenues to $34.8 billion, with a 3.5% decrease in comparable sales. Despite a drop in customer transactions and sales per retail square foot, Trefis predicts full-year 2024 revenues of $142.1 billion, down 7% y-o-y. Earnings per share for Q1 2024 are projected to be $3.64, slightly surpassing consensus estimates. With an EPS estimate of $14.16 and a P/E multiple of 26.5x for fiscal 2024, Home Depot’s Valuation suggests a price of $376 per share, indicating a potential upside.
As Home Depot prepares to release its Q1 results, market analysts are optimistic about the company’s performance, expecting revenues and earnings to surpass market expectations marginally. Despite challenges such as falling lumber prices and shifting consumer spending habits, Home Depot remains resilient with its plans to open new stores and its strong cash flow generation. With a history of inconsistent stock performance and underperformance in recent years, the company faces uncertainties in an ever-changing economic landscape. However, Trefis forecasts a positive outlook for Home Depot’s stock, with a valuation indicating potential growth in the coming months. Investors will be keenly watching the earnings release on May 14 to gauge Home Depot’s performance and future prospects.
