Note: Home Depot FY’22 ended on January 29, 2023.
Home Depot (NYSE: HD) is scheduled to report its fiscal third-quarter results on Tuesday, November 14. We expect the company’s stock to likely trade higher with its revenues and earnings beating the market expectations marginally. The company’s stock is down 8% since the beginning of this year due to falling lumber prices and softening demand. Consumer spending has shifted more to services instead of goods, along with pressure in certain big-ticket discretionary categories. For the full year 2023, Home Depot’s sales and comparable sales are expected to decline between 2% and 5% compared to fiscal 2022. In addition, its operating margin rate is forecast between 14.0% and 14.3% (right in line with its prior 2023 forecast). HD’s diluted earnings per share is expected to fall between 7% and 13% compared to fiscal 2022. It is worth mentioning that HD, with more than 2300 locations, generates more sales from professional contractors than its rival Lowe’s does, and that diversity is a big win for the company in the long term.
Our forecast indicates that Home Depot’s valuation is $317 per share, which is almost 9% higher than the current market price. Look at our interactive dashboard analysis on Home Depot’s Earnings Preview: What To Expect in Q3? for more details.
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(1) Revenues expected to come in ahead of consensus estimates
Trefis estimates Home Depot’s Q3 2023 revenues to be around $36.1Bil, slightly above the consensus estimate. In Q2, Home Depot’s revenues fell 2% year-over-year (y-o-y) to $42.9 billion. Its total comparable-store sales were down 2.0% in Q2 2023. The retailer blames macroeconomic factors such as high inflation. In fact, Lowe’s also had weak sales, with comps falling by 1.4% for Q2 2023.
Home Depot’s company’s average ticket rose 0.1% y-o-y during Q2 2023 to $90.07 but customer transactions were down 1.8% y-o-y to 459.1 million. In addition, the retailer’s sales per retail square foot also fell 2.3% y-o-y to $684.65. We now forecast Home Depot Revenues to be $152.7 billion for the full year 2023, down 3% y-o-y.
2) EPS to likely to beat consensus estimates slightly
Home Depot’s Q3 2023 earnings per share (EPS) is expected to be $3.60 per Trefis analysis, marginally higher than the consensus estimate. The company’s operating income was 8.6% lower during Q2 to $6.59 billion. HD’s net earnings fell 9.9% to $4.66 billion and EPS came in at $4.65 vs. $5.05 a year ago. The company’s inventory position at the end of the quarter was $23.27 billion compared to $26.09 billion a year ago.
(3) Stock price estimate higher than the current market price
Going by our Home Depot Valuation, with an EPS estimate of around $15.01 and a P/E multiple of 21.1x in fiscal 2023, this translates into a price of 317, which is around 9% higher than the current market price.
It is helpful to see how its peers stack up. HD Peers shows how Home Depot compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
|S&P 500 Return||5%||15%||97%|
|Trefis Reinforced Value Portfolio||4%||22%||526%|
 Month-to-date and year-to-date as of 11/13/2023
 Cumulative total returns since the end of 2016