It has been about a month since the last earnings report for Home Depot (HD Quick QuoteHD - Free Report) . Shares have lost about 3.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Home Depot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Home Depot Q1 Earnings & Sales Top Estimates

Home Depot posted first-quarter fiscal 2021 results, wherein earnings and sales beat the Zacks Consensus Estimate and improved year over year. The company gained from the continued strong demand for home-improvement projects as well as its ongoing investments.

Q1 Highlights

The company’s earnings of $3.86 per share improved 85.6% from $2.08 registered in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of $3.04.

Net sales advanced 32.7% to $37,500 million from $28,260 million in the year-ago quarter and beat the Zacks Consensus Estimate of $34,880 million. Sales benefited from the continued robust demand for home improvement projects.

The company is effectively adapting to the high-demand environment, driven by investments in its business over the years and the dedication of its associates to serve customers. Its overall comps grew 31%, with a 29.9% improvement in the United States.

In the reported quarter, comps were aided by a 10.3% rise in average ticket and a 19.3% increase in customer transactions. Moreover, sales per square foot rose 29.8%.

In dollar terms, gross profit increased 32.4% to $12,742 million from $9,625 million in the year-ago quarter, primarily driven by robust sales growth. Meanwhile, gross profit margin contracted almost 10 basis points (bps) from last year to 34%.

Operating income increased 76.5% to $5,781 million, while operating margin expanded 380 bps to 15.4%. Operating margin benefited from top-line growth as well as flat gross margin, offset by higher SG&A and other operating expenses.

Balance Sheet and Cash Flow

Home Depot ended first-quarter fiscal 2021 with cash and cash equivalents of $6,648 million, long-term debt (excluding current maturities) of $34,697 million, and shareholders' equity of $1,748 million. In first-quarter fiscal 2021, it generated $6,310 million of net cash from operations.

In the fiscal first quarter, the company paid out cash dividends of $1,775 million and repurchased shares worth $3,788 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 6.76% due to these changes.

VGM Scores

Currently, Home Depot has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Home Depot has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.