Group 1 - The article discusses how Home Depot has made a significant acquisition to increase its market share in a large and fragmented industry [1] - The acquisition is seen as a strategic move to capture a larger portion of the market, despite Home Depot currently holding only a small fraction of it [1]

Investment Rating - The report assigns a "Buy" rating for the company, Home Depot (HD), marking its first coverage [1]. Core Insights - Home Depot's Q3 FY2024 performance exceeded market expectations, leading to an upward revision of its full-year guidance. The company reported sales of $40.2 billion, a year-over-year increase of 6.6%, while comparable sales decreased by 1.3% [1]. - The company anticipates a full-year sales growth of 4% year-over-year, an increase from the previous guidance of 2.5% to 3.5% [1]. - The report highlights the positive impact of the U.S. interest rate cuts on the real estate market, which is expected to boost demand for home improvement products [1]. Summary by Sections Q3 Performance - Home Depot's Q3 FY2024 sales reached $40.2 billion, with a year-over-year growth of 6.6%. Comparable sales decreased by 1.3%, while net profit was $3.6 billion, down 4.3% year-over-year. The diluted EPS was $3.67, a decrease of 3.7% year-over-year [1]. - The gross profit margin (GPM) was 33.4%, down 0.4 percentage points year-over-year, and the operating profit margin (OPM) was 13.5%, down 0.9 percentage points year-over-year [1]. Market Outlook - The report indicates that the U.S. construction spending continues to show a year-over-year growth trend, with new home sales improving in the July-September period [1]. - The company expects a recovery in real estate demand due to the interest rate cuts, which will likely drive sales growth in home improvement products [1]. Financial Projections - Revenue projections for FY2024 to FY2026 are $158.1 billion, $166.4 billion, and $174.7 billion, respectively, with year-over-year growth rates of 4%, 5%, and 5% [1]. - The report forecasts net profits of $15.1 billion, $15.6 billion, and $16.3 billion for FY2024 to FY2026, with growth rates of -1%, +4%, and +4% [1].

In my last article on Home Depot (NYSE: NYSE: HD ), published in May 2024, I analysed the company’s first quarter report and investigated how the company’s renewed strategy of focusing more on the Pro business was progressing. IAssociate Professor in Finance and Corporate Governance at Brunel University London. I am also a CFA charterholder. In addition, I hold a PhD in Finance from University of Durham, U.K. I have six years of investing experience in the Indian and US equities with a medium to long-term h ...

Investment Rating - The report maintains a "Buy" rating for the company [2][9]. Core Insights - Demand recovery is expected following the stabilization of loan rates, leading to an upward revision of the full-year guidance [2][9]. - In Q3 2024, the company's total sales reached $40.2 billion, a year-on-year increase of 6.6%, primarily due to the acquisition of SRS and an additional 53rd week of operations [5][7]. - Comparable sales decreased by 1.3% year-on-year, with October showing a positive growth of 1%, attributed to hurricane-related demand [5][7]. - The company anticipates total sales growth of approximately 4% for 2024, up from a previous guidance of 2.5%-3.5% [9]. Summary by Sections Market Data - Closing price: $405.72 - Total shares outstanding: 993 million - Total market capitalization: $403 billion - Total assets: $97.3 billion - Net assets attributable to shareholders: $5.79 billion [3]. Financial Performance - Q3 2024 gross margin was approximately 33.4%, a decline of about 40 basis points year-on-year [8]. - Operating profit margin for Q3 2024 was 13.5%, down 0.8 percentage points year-on-year [8]. - Net profit for Q3 2024 was $3.6 billion, a year-on-year decrease of 4.3% [8]. - Inventory at the end of Q3 2024 was $23.9 billion, an increase of $1.1 billion year-on-year, with an inventory turnover rate of 4.8 times, up from 4.3 times in Q3 2023 [8]. Future Guidance - The company expects comparable sales to decline by approximately 2.5% in 2024, an improvement from the previous guidance of a 3%-4% decline [9]. - Projected revenues for 2024-2026 are $158.2 billion, $163.6 billion, and $171.1 billion, with year-on-year growth rates of +3.7%, +3.4%, and +4.6% respectively [9]. - Projected net profits for the same period are $14.9 billion, $15.4 billion, and $16.7 billion, with year-on-year changes of -1.9%, +3.8%, and +8.0% respectively [9].

Core Viewpoint - Home Depot is positioned for a potential rebound in the coming year despite facing operational challenges and declining same-store sales over the past quarters [1][2]. Sales Performance - Home Depot's same-store sales have declined for eight consecutive quarters, with a 1.3% drop in Q3 2024, which was better than the expected 3.3% decline [3][5]. - The U.S. same-store sales growth also reflected a similar trend, with a 3.5% decline in Q3 2023 [3]. Revenue and Earnings - The company's overall revenue increased by 6.6% to $40.2 billion, aided by the acquisition of SRS Distribution, while adjusted earnings per share (EPS) fell by 2% to $3.78, surpassing analysts' expectations [5]. - Management revised its full-year same-store sales guidance to a decline of 2.5%, an improvement from the previous forecast of a 3% to 4% decline [6]. Market Conditions - The home improvement sector has faced challenges due to the pandemic's impact on demand, inflation, and rising interest rates, which have slowed housing turnover to its lowest level in 30 years [8]. - The Federal Reserve's recent interest rate cuts and pent-up demand in home improvement are expected to benefit Home Depot in 2025 [9]. Future Outlook - Remodeling activity is projected to return to growth in the second half of 2025, with Home Depot likely to outperform this trend [10]. - The stock is currently trading at a price-to-earnings (P/E) ratio of approximately 27, indicating it is not undervalued, but potential operating leverage could lead to earnings growth as same-store sales improve [11].

Core Insights - Home Depot's acquisition of SRS Distribution for $18.25 billion marks a strategic shift towards catering to professional contractors and expanding its market presence beyond traditional retail [3][10][12] - The deal is expected to enhance Home Depot's sales, contributing approximately $6.4 billion in incremental sales this year, despite a challenging home improvement market [17][4] - Home Depot aims to leverage SRS's specialized product offerings and logistics capabilities to strengthen its position in the professional market [18][20] Company Strategy - Home Depot's acquisition of SRS is part of a broader strategy to increase sales to professional contractors, which currently account for about 50% of its business compared to 20%-25% at competitors like Lowe's [14][15] - The acquisition is seen as an opportunity to enter a new market with an established player, potentially accelerating growth in the professional segment [9][10] - Home Depot plans to maintain its focus on do-it-yourself sales while integrating SRS's operations to enhance overall business performance [17][22] Market Impact - The acquisition is projected to expand Home Depot's total addressable market by approximately $50 billion, bringing it to around $1 trillion [8] - SRS's established logistics network and dedicated sales force are expected to improve delivery efficiency and customer service for professional clients [18][20] - The deal comes at a time when housing turnover is low, but Home Depot is optimistic about future growth as interest rates decline [11][14] Operational Synergies - Home Depot is beginning to see synergies from the acquisition, including the integration of SRS's logistics capabilities with its own distribution network [18][21] - SRS's specialized sales force and product catalog are anticipated to enhance Home Depot's offerings to professional customers [20][19] - The collaboration aims to utilize Home Depot's existing infrastructure to support SRS's growth while allowing SRS to operate independently [22][23]

Core Viewpoint - Home Depot reported mixed financial results for Q3, with revenue growth driven by hurricane-related demand, but a decline in net earnings and comparable sales due to rising interest rates and economic uncertainty [2][3][7]. Financial Performance - Home Depot's net sales increased by 7% year-over-year to $40.2 billion, while adjusted EPS fell by 4.3% year-over-year to $3.78, surpassing estimates [2]. - The company's operating margin decreased by 800 basis points year-over-year to 13.5%, attributed to increased supply chain investments [3]. - For FY 2024, Home Depot anticipates a 2.5% decline in comparable sales but expects total revenue to rise by 4%, driven by acquisitions and infrastructure improvements [7][8]. Market Conditions - Rising interest rates have led to higher mortgage rates, which have suppressed home sales, with the 30-year fixed-rate mortgage averaging 6.79% as of November 11, up from 6.08% the previous year [4]. - The decline in home prices may negatively impact Home Depot in the short term, but the company is well-positioned for long-term growth due to its strong sales from professional contractors [5]. Stock Performance - Home Depot's stock has shown volatility over the past three years, with annual returns of 60% in 2021, -22% in 2022, and 13% in 2023, contrasting with the more stable performance of the Trefis High Quality Portfolio [6]. - The revised valuation for Home Depot is set at $404 per share, based on an expected EPS of $14.84 and a P/E multiple of 27.2x for FY 2024, aligning closely with the current market price [8].

The 2024 Q3 earnings season is slowly winding down, with just a small chunk of S&P 500 members yet to reveal their quarterly results. The period has so far been positive, with earnings growth remaining positive on the back of a strong showing from Technology yet again.Below is a chart illustrating the overall earnings picture on a quarterly basis.Image Source: Zacks Investment ResearchStay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Recently, we heard from home improvement giant Home ...

ATLANTA, Nov. 14, 2024 /PRNewswire/ -- The Home Depot®, the world's largest home improvement retailer, today announced that its board of directors declared a third-quarter cash dividend of $2.25 per share. The dividend is payable on December 12, 2024, to shareholders of record on the close of business on November 27, 2024. This is the 151st consecutive quarter the company has paid a cash dividend.The Home Depot is the world's largest home improvement specialty retailer. At the end of the third quarter, the ...

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>Here are the key points:Total Q3 earnings for the 458 S&P 500 members that have reported results through Wednesday, November 13th, are up +6.9% on +5.4% higher revenues, with 73.6% beating EPS estimates and 61.4% beating revenue estimates. The earnings and revenue growth pace for this group ...