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Sangara Narayanan
Sangara Narayanan
Articles (562) 

Will Home Depot Beat the Street During the 3rd Quarter?

How likely is company to exceed expectations for the 5th quarter in a row?

November 10, 2017 | About:

Home Depot (NYSE:HD) will be reporting its third-quarter earnings before the market opens on Nov. 14. The home improvement major has beaten market estimates for the last four quarters in a row, and with the U.S. economy doing reasonably well in the last few months, there is an excellent chance for Home Depot to report earnings in line with market expectations or beat them.

Home Depot remained a huge victim of Amazon-related (NASDAQ:AMZN) news, and if not for the company reporting solid second-quarter results the valuation would have come under intense pressure. But the stock is up by nearly 34% in the last year, and as long as Home Depot continues to report midsingle-digit comparable-store sales, the stock price will keep inching upward.

Home Depot reported a better-than-expected 6.2% comparable sales growth during the second quarter, which allowed the company to revise its 2017 sales growth guidance to 5.3%, a huge jump from the previously expected 4.6% growth. The company also raised its diluted earnings per share growth guidance for the year and now expects growth of approximately 13% from fiscal 2016 to $7.29, up from the previous expectation of 11%.

The Street is expecting the home furnishing giant to report earnings per share of $1.81 during the third quarter while revenue is expected to come in at $24.47 billion. If Home Depot hits the revenue target during the quarter, as expected by Wall Street, that would be a growth rate of 5.4% compared to last year, slightly better than the 5.3% revenue growth Home Depot has guided so far but still much lower than the 6.2% sales growth the company reported during the second quarter.


The U.S. economy has done reasonably well in the last few months. Consumer spending increased this September, reaching the highest level we have seen since 2009 while consumer confidence reached its highest level in 17 years this October. With most of the economic indicators staying largely positive, the chances of Home Depot beating earnings estimates during the third quarter look extremely bright.

Home Depot is trading at nearly 20 times forward earnings and looks reasonably priced at the current levels. Its No. 1 position in the U.S. home improvement market does put the company in an extremely strong position to keep improving its revenues at a steady pace over the long term.

Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours

About the author:

Sangara Narayanan
Sangara Narayanan holds an MBA from Kent State University, Ohio, and has worked on the floor as a trader in New York. You know where. He is passionate about capital markets and specializes in business analysis, stock valuations and making chicken curry

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Bigzoo - 11 months ago    Report SPAM

"Home Depot remained a huge victim of Amazon-related news" - could you ellaborate on this part a bit? - I dont know if this is your opinion or a general obseravation, but as far as I can see:

1. ppl usually do not buy building materials (e.g. tiles, laminated wood, cement, paint, windows, kitchensink, toilett, etc.) on Amazon.

2. In many cases, mostly private individuals do small jobs or run out of smtg in the middle of the job and they need the material immediately, which means they just run to the nearest store buy it ... and case is closed.

I dont really think that HD or Lowe's is threated by Amazon.

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