{"id":13568,"date":"2023-12-02T17:37:21","date_gmt":"2023-12-02T17:37:21","guid":{"rendered":"https:\/\/infundpros.com\/investment\/home-depot-earnings-beat-expectations-but-sales-fell-why-the-stock-is-rising\/"},"modified":"2023-12-02T17:37:22","modified_gmt":"2023-12-02T17:37:22","slug":"home-depot-earnings-beat-expectations-but-sales-fell-why-the-stock-is-rising","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=13568","title":{"rendered":"Home Depot Earnings Beat Expectations but Sales Fell. Why the Stock Is Rising."},"content":{"rendered":"
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\n Home Depot
\n beat earnings expectations in the third quarter but flagged continued pressure on big-ticket items as sales fell 3%.<\/p>\n

The home-improvement company narrowed full-year guidance, and all but confirmed its first annual sales drop since 2009. However, the stock climbed 6.6% in early morning trading and was on track for its largest daily percentage increase since November 2022. <\/p>\n

\n

That\u2019s partly because earnings beat estimates. Home Depot (ticker: HD) reported earnings of $3.81 a share, beating estimates of $3.75. Sales fell 3% year over year to $37.7 billion but narrowly beat analysts\u2019 expectations of $37.6 billion, according to FactSet.<\/p>\n

CEO Ted Decker said that while consumers were still committing to smaller projects,
\n Home Depot
\n continued to see pressure in certain big-ticket, discretionary categories. Same-store sales for big-ticket items fell 5.2% year-over-year. <\/p>\n

The company narrowed its full-year guidance, saying it now expects sales and comparable sales to decline between 3% and 4% compared to its previous 2% to 5% range. Analysts currently see a 2.9% drop.<\/p>\n

Home Depot now expects earnings per share falling between 9% and 11%, from a previous range of 7% to 13%. Analysts polled by FactSet see a 9.4% decline.<\/p>\n

\u201cThis year reflects a period of moderation, however, we are confident in our ability to navigate through this unique environment,\u201d Decker said on a call with analysts Tuesday.<\/p>\n

While it\u2019s not a guidance hike, it does lower the worst-case scenario end of the range. In the current climate, with investors nervous over the strength of consumer spending in the months ahead, that\u2019s likely being seen as a positive. <\/p>\n

\u201cSome might be disappointed by only narrowing the guidance despite the slight EPS beat and the better-than-feared comps,\u201d wrote Evercore ISI analyst Greg Melich. \u201cThat said, with continued pressure in certain big-ticket discretionary categories and a trend to smaller projects,\u00a0HD\u00a0took the conservative approach\u2014which we agree with.\u201d<\/p>\n

D.A. Davidson analyst Michael Baker wrote that while business trends \u201cclearly remain soft,\u201d Tuesday\u2019s report was no worse than most expected \u2014 although he remains cautious on the sector in the medium term. <\/p>\n

\u201cWhile we may see some relief today, we don\u2019t think we can call the all clear yet,\u201d D.A. Davidson\u2019s Baker wrote. <\/p>\n

Shares of rival
\n Lowe\u2019s
\n (LOW) were also climbing on Home Depot\u2019s report, up 4.9%. <\/p>\n

It hasn\u2019t been an easy time for retailers focused on home improvement. With the housing market at its most unaffordable since the 1980s and mortgage rates pushing 23-year highs, people haven\u2019t been too keen on buying new homes\u2014or embarking on the renovations that tend to accompany a new purchase. Higher interest rates have also dissuaded current homeowners from taking on remodeling projects. That has translated to fewer sales for companies such as Home Depot and rival Lowe\u2019s.<\/p>\n

Home Depot\u2019s Pro business, which caters to contractors, outperformed do-it-yourself this quarter, the company said. The Pro sector has been one of Home Depot\u2019s biggest growth drivers in recent quarters, fueled in part by pent-up demand. In the latest quarter, the company saw strength in pro-heavy categories, like roofing, insulation, and portable power. <\/p>\n

But the backlogs that have been keeping Pro demand afloat may be easing, the company said, even though they\u2019re \u201cstill healthy and elevated\u201d compared to historical norms. Backlogs in October stood at their lowest level since the first quarter of 2022, according to the latest Associated Builders and Contractors\u2019 backlog indicator released Tuesday.<\/p>\n

Baker has a Neutral rating on the stock, while Melich has an Outperform rating. Half of the analysts covering the stock have Buy ratings, while 42% rate it a Hold and 8% rate it a Sell. <\/p>\n

Home Depot shares are down 8% year to date. The
\n S&P 500
\n is up 15%. <\/p>\n

Write to Sabrina Escobar at sabrina.escobar@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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