Home Depot’s earnings beat market estimates

Dow Jones hardware heavyweight Home Depot reported Q2 results early Tuesday. Rival Lowe’s will announce earnings on August 22. HD stock rose early Tuesday. LOW stock is attempting to reclaim technical support.

Homebuilders, a key market for hardware and home improvement retailers, rallied aggressively in 2023. Rising interest rates have slowed sales of existing homes, driving demand and prices for newly built homes.

That has been good for homebuilders, such as KB Home, which was the IBD Stock Of The Day last week. However, home improvement retailers such as Home Depot and Lowe’s face increased uncertainty after years of pandemic renovations.

Citi raised its price target on HD stock to 375 from 327 on Aug. 2 and maintained a buy rating on shares as it sees home improvement groups in-line with forecasts.

But Argus lowered its target to 350 from 400 at the end of July on expectations of reduced sales as consumers cut back on home improvement projects, after more than two years of “aggressive repair and remodeling activity.” Argus kept its buy rating on HD stock.

Home Depot’s Earnings

Home Depot reported a 7.9% earnings decline to $4.65 per share on a 2% dip in sales to $42.92 billion. Analyst consensus projected that Home Depot’s earnings fall 11.9% to $4.45 per share during the quarter, on a 3.7% slide in revenue to $42.19 billion. Comparable sales fell 2%, almost half of the 3.9% drop expected by analysts.

CEO Ted Decker noted continued strength in smaller project categories, but said there is pressure on certain big-ticket, discretionary categories. “We remain very positive on the medium-to-long term outlook for home improvement,” Decker said in the release.

For the year, Home Depot guided a 2% sales decline and 5% drop in comparable store sales. The company expects earnings per share to fall between 7% and 13% compared to 2022. The board also authorized a new $15 billion share repurchase program, effective Aug. 15. It is worth noting that Home Depot posted its first earnings decline in three years in its Q1 report on May 16.