Buy, Sell Or Hold HD Stock?

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].