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Is Home Depot (HD) likely to Beat Earnings Estimates in Q2?

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We expect the global dealer in consumer goods Home Depot Inc. (HD - Free Report) to beat expectations when it reports second-quarter 2014 results before the market opens on Aug 19.

Why a Likely Positive Surprise?

Our proven model shows that Home Depot may beat earnings because it has the right combination of two key components.

Positive Zacks ESP: Home Depot currently has an Earnings ESP of +1.39%. This is because the Most Accurate estimate stands at $1.46 per share, while the Zacks Consensus Estimate is pegged at $1.44.

Zacks Rank #3 (Hold): Note that stocks with a Zacks Rank #1, 2 and 3 have a higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Home Depot’s Zacks Rank #3 and Earnings ESP of +1.39% makes us confident of a positive earnings beat.

What's Driving Better-than-Expected Earnings?

Being the world’s largest home improvement retailer, we believe that Home Depot remains well positioned to benefit from the gradually recovering housing market and expect the company to continue with its upbeat performance going forward.

Home Depot has been implementing several initiatives to drive long-term growth. The company is trying to widen the range of its premium products, as this category has witnessed strong momentum over the last four quarters. This home improvement retailer is also looking for opportunities to expand its store count and enhance its e-Commerce capabilities.

Moreover, with the acquisition of window covering retailer, Home Depot has strengthened its presence in the rapidly growing online coverings market. We believe that these initiatives will drive the company’s top and bottom-line growth in the long run.

Additionally, we believe that the company is on track to achieve its long-term dividend payout, share repurchase and return on investment targets.

Home Depot has topped the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 4.1%. In the last concluded quarter, the company beat the Zacks Consensus Estimate of 98 cents by 2%.

Other Stocks to Consider

Home Depot is not the only firm looking up this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:

Abercrombie & Fitch Co. (ANF - Free Report) has an Earnings ESP of +20.00% and a Zacks Rank #2 (Buy).

GameStop Corp. (GME - Free Report) has an Earnings ESP of +10.53% and a Zacks Rank #3.

Dollar Tree Inc. (DLTR - Free Report) has an Earnings ESP of +7.69% and a Zacks Rank #3.

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