Back to top

Image: Bigstock

The Zacks Analyst Blog Highlights: Home Depot, Lowe's, Target and Walmart

Read MoreHide Full Article

For Immediate Release

Chicago, IL –August 13, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Home Depot (HD - Free Report) , Lowe's (LOW - Free Report) , Target (TGT - Free Report) and Walmart (WMT - Free Report) .

Here are highlights from Friday’s Analyst Blog:

Should You Buy Home Depot (HD - Free Report) Stock Ahead of Q2 Earnings?

Shares of Home Depot opened lower Friday just a few trading days before the home improvement retailer is set to release its second-quarter financial results. Home Depot stock has lagged the S&P 500 over the last six months, but the company’s business remains strong. So let’s take a look to see if investors should consider buying HD stock ahead of its Q2 earnings release. 

Overview

Home Depot is one of the world’s largest home improvement companies. The firm reported sales of $100.9 billion in fiscal 2017, which crushed rival Lowe's and its $68.6 billion. In the first quarter, Home Depot posted lower-than-expected quarterly revenues, but its same-store sales were encouraging.

The retailer’s comp sales jumped 4.2%, while U.S. comps popped 3.9%. For some growth perspective, Target saw its comps climb 3% in its most recent quarter, while Walmart’s U.S. comps climbed just 2.1%.

Home Depot also cited the not-so-warm start to the spring as a major reason it missed top-line estimates. Plus, the company expects its fiscal 2018 sales to surge by 6.7% with comp sales projected to climb by 5%. Meanwhile, HD reaffirmed its full-year earnings guidance and expects its earnings to soar by 28%.

Price Movement 

Home Depot has seen its stock price climb nearly 70% over the last three years, which outpaces the S&P 500’s roughly 37%. Over the last 24 months, shares of HD have climbed over 43%. However, over the last six months, HD stock is up around 7% and falls just behind the S&P’s roughly 8% climb.

Valuation

Moving on, HD is currently trading at 20.2X forward 12-month Zacks Consensus EPS estimates, which marks a discount compared to its industry’s 27.8X. Furthermore, over the last year, HD has traded as high as 23.5X and as low as 18X. Home Depot is also currently trading directly at its one-year median and not too far above its five-year median of 19.9X. Therefore, HD’s valuation is hardly stretched at the moment.

Outlook

Home Depot is expected to see its Q2 revenues jump by 6.7% to hit $29.98 billion, based on our current Zacks Consensus Estimate. Looking ahead to the full year, HD’s revenues are projected to surge by nearly 7% to reach $107.82 billion.

At the bottom end of the income statement, Home Depot’s adjusted quarterly earnings are projected to surge over 26% to $2.84 per share. The home improvement retailer’s adjusted fiscal 2018 earnings are expected to climb by nearly 27% to $9.46 per share. 

Bottom Line

Home Depot has earned one quarterly and one full-year downward earnings estimate revision within the last 30 days, while seeing no positive changes. However, Home Depot has an excellent management team that has helped it top our quarterly earnings estimates for almost seven years in a row.

The company is set to report its quarterly financial results before the market opens on Tuesday, August 14. And it looks like investors might want to consider Home Depot stock based on its earnings growth outlook and strong core business fundamentals.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com                                      

http://www.zacks.com                                                   

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.