Home improvement retailer Home Depot (HD, Financial) is set to release its fiscal 2024 third-quarter earnings report on November 12. Analysts expect a 3.8% year-over-year increase in revenue to $39.13 billion, while adjusted earnings per share (EPS) are anticipated to decline 4.5% to $3.64.
In the second fiscal quarter, Home Depot reported a slight increase in revenue to $43.18 billion. However, comparable sales decreased by 3.3%, surpassing the analysts' forecast of a 2.1% decline, marking the seventh consecutive quarter of negative comparable sales growth. During the earnings call, company executives attributed this to high interest rates and uncertainty in consumer spending, signaling a cautious outlook for the rest of the year.
Home Depot projects a 3% to 4% decrease in comparable sales for the fiscal year 2025. Nonetheless, the recent acquisition of SRS Distribution, a supplier to landscaping, roofing, and pool professionals, is expected to boost overall annual sales.
Significantly, Home Depot benefits from a financially stable customer base, with about half of its sales coming from professionals and the rest from individual homeowners. Management's perspective on the real estate market is under scrutiny as rising long-term bond yields are driving mortgage rates higher, potentially offsetting gains from increased construction and renovation product sales.
The aftermath of two hurricanes could lead to an increase in insurance claims and rebuilding efforts, possibly enhancing Home Depot's sales in the third quarter. Looking ahead, potential interest rate cuts may bolster demand for Home Depot's offerings next year. Analysts predict a 3% rise in sales to $157 billion for the fiscal year 2025, and a 3.8% increase to $162 billion for 2026. Adjusted EPS is expected to grow from $15.11 in fiscal 2024 to $15.63 by 2026.
Among the 35 analysts covering Home Depot stock, 25 recommend a "strong buy," 1 suggests a "moderate buy," and 9 advise holding. The average target price is $412.69, suggesting a 2% upside from the previous closing price.
