Home Depot (HD) despite topping first-quarter views, year-over-year revenue fell for the first time in three years. The Dow Jones home improvement retailer also missed earnings estimates early Tuesday and guided lower for the full year. HD stock declined modestly.
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While home improvement retailers have been winners of the Covid pandemic, recently, they have found favor as defensive plays amid inflation and global recession fears. In early 2023, Home Depot stock rallied along with other housing-related plays as mortgage rates rose.
But Home Depot and competing home improvement retailers Lovin (Low) have been stuttering since early February. Still, homebuilder stocks have rallied strongly, even as their current earnings have fallen sharply. Lowe’s reports next week.
Ahead of Home Depot earnings, Morgan Stanley (Mrs) Simeon Goodman wrote Thursday that the risk/reward on Home Depot stock is “moderately positive.”
“HD shares can be bought at a guidance reduction,” Goodman wrote, given the current uncertainty in the housing market.
“The housing market may undergo a multi-year digestion, in which stocks may tread water until turnover and prices stabilize, and there is a clear path to higher growth,” he wrote.
Shares of HD fell 2.4% during premarket trading on Tuesday. On Monday, Home Depot shares fell 0.7% to 288.54. Dow Jones stock is below its 50-day and 200-day lines.
Home Depot Stock: Earnings
Assessments: Wall Street predicted Home Depot earnings would fall 7% to $3.80 per share in Q1. Analysts had expected revenue to decline 1% to $38.31 billion. Same-store sales saw a 1.6% decline.
Results: EPS fell 6.6% to $3.82 as Home Depot’s sales fell 4% to $37.26 billion. Same-store sales fell 4.5%, as comparable sales in the U.S. fell 4.6%.
“We expected fiscal 2023 to be a moderate year for the home improvement market. Our sales for the quarter fell short of our expectations, primarily driven by lumber depreciation and unfavorable weather, particularly in California, which disproportionately affected our western division due to extreme weather,” said CEO Ted Decker. said in a statement on Tuesday.
Outlook: Home Depot also revised its 2023 guidance based on “continued uncertainty related to consumer demand.” The home improvement retailer expects revenue and same-store sales to decline 2% and 5%, respectively, compared to fiscal 2022. Home Depot executives forecast diluted earnings per share to fall 7%-13% in 2023.
The Dow Jones stock previously guided EPS to decline in the mid-single digits. In February, it guided for flat sales and comparable sales growth. Meanwhile, Home Depot’s earnings per share fell 5% to $15.72 per share and sales fell 1% to $156.29 billion, according to the analyst consensus.
In late February, Home Depot reported mixed fourth-quarter financial results. Dow Jones reported earnings of $3.30 per share versus the FactSet consensus of $3.28. It came in at $35.97 billion vs. $35.83 billion expected.
Year-over-year, Home Depot Q4 revenue rose 2.8% and revenue rose 0.3%. This marked the second consecutive quarter of profit and sales growth.
The Dow Jones stock ranks fifth in IBD Wholesale-Building Products Industry Group. The Home Depot stock has a composite rating of 73 out of 99. HD also has a 44 pro strength rating. The EPS estimate for Dow Jones stock is 88 out of 99.
Dow Jones stock is on Home Depot competitor Lowe’s Deck
Lowe’s follows Dow Jones’ Home Depot late on May 23. Wall Street forecasts that Lowe’s earnings per share fell 2% to $3.45, with revenue falling 8% to $21.68 billion.
On March 1, Lowe’s Q4 earnings accelerated for the third quarter in a row, with revenue rising 5.2% to $22.445 billion, up 28% to $2.28 a share.
Adjusted earnings results exclude pre-tax transaction costs related to the sale of its Canadian retail business, which sent $400 million in cash to private-equity firm Sycamore Partners in November. Lowe’s comparable sales fell 1.5% in the fourth quarter, while US comparable sales fell 0.7%. FactSet predicts flat year-over-year growth.
In fiscal 2023, Lowe’s forecasts earnings of $13.60 to $14 per share on total sales of $88 billion to $90 billion. For the full year 2022, Lowe’s earnings will be $13.76 per share on $97 billion in sales. Management expects slow foot traffic to continue throughout the year. The home retailer sees comparable sales decline 2% year-over-year.
Lowe’s shares fell 2.5% on Tuesday. On Monday, the stock fell 0.8% to 201.55, managing to close above its 50-day and 200-day lines.
Follow Kit Norton on Twitter @kidnorton For added security.
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