Investors Are Keeping a Close Eye on Home Depot’s Financials For the First Quarter of 2023
The home improvement retailer is expected to report an earnings shortfall for the first time in three years.
Home improvement stores like Home Depot (NYSE: HD) and Lowe’s (NYSE: LOW) were among the businesses that thrived during the pandemic. However, these companies’ fortunes have been less certain, with growing concerns about inflation. Despite initial gains in 2023, both Home Depot and Lowes have seen their fortunes wane since February. To contrast, homebuilder stocks have made significant strides, despite their earnings taking a hit. This could be seen as an indicator of current unstable market conditions.
Analysts have adjusted their ratings for Home Depot accordingly. Baird analyst Peter Benedict reduced the price target on the stock from 340 to 320 while maintaining an “Outperform” rating. Then, noting the impact of seasonal sales and slower demand. Citigroup’s Steven Zaccone also reduced the target price for Home Depot from 332 to 327. Then, predicting a possible dip in Q1 same-store sales for Home Depot and Lowe’s.
Despite this, Simeon Gutman from Morgan Stanley suggests the risk/reward scenario for Home Depot stock looks “modestly positive.” He anticipates that the shares could be bought on a guidance cut and indicates that the housing market could see a multiyear period of adjustment.
Source: CNBC Television YouTube
What to Know Before Investing
Here are the stats and predictions you need to be aware of before investing:
- Shares of Home Depot dipped slightly by 0.85% on Monday, trading at 288.
- The stock is currently trading below its 50-day and 200-day moving averages.
- Wall Street predicts a 7% fall in Home Depot’s earnings to $3.80 per share in Q1.
- Revenue is expected to increase slightly by 1% to $38.31 billion, with a predicted drop in same-store sales by 1.6%.
Home Depot has already signalled its expectation for a modest fiscal year 2023, with a mid-single-digit decline in earnings per share and flat sales growth. CEO Ted Decker has expressed confidence in the company’s strong position in the market despite the anticipated downturn in home improvement demand.
Meanwhile, Lowe’s, Home Depot’s chief competitor, is also preparing for its earnings report on May 23. Analysts forecast a 2% dip in earnings per share and an 8% drop in revenue for Lowe’s. What are your thoughts before tomorrow’s earnings report? Tweet us @WealthyVC.
Despite these predictions, Lowe’s posted an impressive 28% rise in Q4 earnings per share and a 5.2% increase in revenue. Nevertheless, the company foresees slower customer footfall for the rest of the year, with comparable sales expected to be flat or down by up to 2%.
Shares of Home Depot closed trading today at $288.54 per share, down -0.66% on the day. YTD, HD stock is down -8.66%.
Disclaimer: Wealthy VC does not hold a long or short position in any of the stocks mentioned in this article.