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Is Home Depot (HD) Likely to Retain Earnings Beat Trend in Q1?

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The Home Depot, Inc. (HD - Free Report) is expected to register year-over-year top and bottom-line growth when it reports first-quarter fiscal 2021 results on May 18, before market open. The Zacks Consensus Estimate for fiscal first-quarter earnings of $2.91 per share suggests growth of 39.9% from the year-ago period’s reported figure. Also, the consensus estimate has moved up 2.5% in the past 30 days.

Moreover, the consensus mark for quarterly revenues is pegged at $33.98 billion, indicating an increase of 20.3% from the figure reported in the year-ago quarter.

Notably, the leading home improvement retailer delivered an earnings surprise of 1.2% in the last four quarters, on average.

Key Factors to Note

Home Depot’s first-quarter fiscal 2021 results are likely to have benefited from continued strong demand for home-improvement projects. Moreover, broad-based strength across its business and geographies is expected to have boosted comparable sales (comps) performance. Additionally, it has been benefiting from strong growth in its Pro and DIY customer categories. The increased stay-at-home trends have led to a rise in repairs and home-remodeling projects, with heightened engagement from new and existing customers. This has resulted in increased engagement in DIY projects.

Home Depot’s Pro segment has been a key growth driver, with the Pro segment witnessing robust sales growth for the past several quarters. On the last reported quarter’s earnings call, management predicted an increase in demand for all Pro categories, with a recovery in larger Pro customers, as evident from the increase in backlogs.

The Home Depot, Inc. Price and EPS Surprise


The Home Depot, Inc. Price and EPS Surprise

The Home Depot, Inc. price-eps-surprise | The Home Depot, Inc. Quote

Moreover, the company has been on track with its investments to build a Pro ecosystem that includes professional-grade products, exclusive brands, enhanced delivery, credit, digital capabilities, field sales support, HD rental and more. The company’s fiscal first-quarter results are likely to reflect gains from its efforts to provide a differentiated Pro ecosystem, with deeper engagement with Pro customers.

The company has also been witnessing significant benefits from the execution of its “One Home Depot” investment plan, which focuses on expanding supply-chain facilities, technology investments and enhancements to the digital experience. Amid the pandemic, customers have been blending the physical and digital elements of the shopping experience more than before, making the company’s interconnected One Home Depot strategy the most relevant. Its interconnected retail strategy and underlying technology infrastructure have been helping to consistently boost web traffic for the past several months.

Additionally, it has been benefiting from enhanced delivery and fulfillment options to provide a robust interconnected experience. Gains from the efforts are likely to have aided the company’s sales and earnings performance in the fiscal first quarter.

However, it has been witnessing a soft margin trend on higher expenses. Negative product mix and pressures from shrink and higher transportation costs have likely been headwinds.

Zacks Model

Our proven model conclusively predicts an earnings beat for Home Depot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Home Depot has a Zacks Rank #3 and an Earnings ESP of +8.23%.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat:

Abercrombie & Fitch Company (ANF - Free Report) ) has an Earnings ESP of +22.92% and it currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Macy’s, Inc. (M - Free Report) presently has an Earnings ESP of +28.60% and a Zacks Rank #2.

Target Corporation (TGT - Free Report) currently has an Earnings ESP of +7.42% and a Zacks Rank #2.

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