Home Depot (HD) Up 6.7% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Home Depot's recent earnings report showed mixed results, with net sales exceeding expectations but earnings per share (EPS) falling short, reflecting ongoing challenges in the housing market and consumer spending [2][3]. Financial Performance - Home Depot reported adjusted earnings of $3.74 per share, a decrease of 1.1% from $3.78 in the same quarter last year, missing the Zacks Consensus Estimate of $3.81 per share [4]. - Net sales increased by 2.8% to $41.4 billion from $40.2 billion year-over-year, surpassing the Zacks Consensus Estimate of $41 billion [5]. - Customer transactions decreased by 1.6% year-over-year, while the average ticket size improved by 1.8% [6]. Cost and Margin Analysis - Gross profit rose by 2.9% year-over-year to $13.8 billion, with a gross margin of approximately 33.4%, up 2 basis points year-over-year [7]. - Selling, General and Administrative (SG&A) expenses increased by 5.9% to $7.8 billion, representing about 18.5% of sales, which is an increase of roughly 60 basis points year-over-year [8]. Financial Position - Home Depot ended the third quarter with cash and cash equivalents of $1.7 billion, long-term debt of $46.3 billion, and stockholders' equity of $12.1 billion [9]. Future Expectations - Management anticipates continued pressure in the fourth quarter due to the absence of major storm activity and ongoing consumer uncertainty, leading to a revised sales growth expectation of 3% year-over-year [10][11]. - The company expects a decline in EPS of 6% year-over-year for fiscal 2025, with adjusted EPS estimated to fall by 5% [14]. Market Sentiment - Since the earnings release, there has been a downward trend in estimates, with the consensus estimate shifting down by 12.76% [15]. - Home Depot currently holds a Zacks Rank of 5 (Strong Sell), indicating expectations of below-average returns in the coming months [17].