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Home Depot (HD) Stock Rises 21.3% YTD: More Room to Run?

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The Home Depot Inc. (HD - Free Report) has held up well in a disrupted market, thanks to the continued strong demand for home-improvement projects as well as its ongoing investments. The company is effectively adapting to the continued boom in renovations and construction activities, driven by investments in its business over the years and the dedication of its associates to serve customers. It also gained from strong growth in its Pro (professional) and DIY (Do-It-Yourself) customer categories, and continued digital momentum.

The effects of the attributes are well-reflected in the company’s solid run on the bourses. Shares of the Zacks Rank #1 (Strong Buy) company have rallied 21.3% in the year-to-date period compared with the industry’s growth of 17.3%. Moreover, it has outpaced the Zacks Retail-Wholesale sector’s growth of 1.6%.

Additionally, an uptrend in the Zacks Consensus Estimate echoes a positive sentiment. In the past 30 days, the consensus marks for fiscal 2021 and 2022 earnings per share have moved up 0.7% each. For fiscal 2021, its earnings estimates are pegged at $14.00 per share, suggesting a rise of 16.4% from the year-ago period’s reported figure.

 

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Home improvement retailers have been gaining from consumers’ continued inclination toward renovation and maintenance activities, which has led to increased investments to make homes comfortable. Also, a favorable housing market, driven by high home-buying activities has been driving the demand for home improvements goods. Home Depot has been a beneficiary of the trend, being the leading retailer in the home-improvement space.

This was well-reflected in the company’s robust first-quarter fiscal 2021 results. Adjusted earnings improved 85.6% year over year, while sales were up 32.7% mainly on continued boom in renovations and construction activities. 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.

The company is also reaping significant benefits from the execution of the “One Home Depot” investment plan, which focuses on expanding supply-chain facilities, technology investments and enhancement to the digital experience. The interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters. The credit for delivering robust customer experiences also goes to its enhanced delivery and fulfillment options.

Over the years, the company has created the fastest, most efficient delivery network in home improvement through options like buy online pickup in store (“BOPIS”) with convenient pickup lockers, buy online deliver from store with express car and van delivery, and the curbside pickup. Other recently launched interconnected facilities like the mixed-cart selling from store capability and in the tool rental facilities are likely to enhance the experience for both Pro and DIY customers.

Moreover, the company’s Pro business has been a major revenue generator in the past few quarters. Home Depot expects continued sales growth from Pros as project demand is strong and the Pros’ backlogs are growing. The company remains on track with its investments to build a Pro ecosystem, which includes professional-grade products, exclusive brands, enhanced delivery, credit, digital capabilities, field sales support, HD rental and more. The company expects its differentiated Pro ecosystem to aid in deeper engagement with Pro customers in the long term.

Other Favorable Stocks to Watch

Target Corporation (TGT - Free Report) has a long-term earnings growth rate of 13.3%. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lowe’s Companies, Inc. (LOW - Free Report) has an expected long-term earnings growth rate of 13.8%. It currently has a Zacks Rank #2 (Buy).

Walmart Inc. (WMT - Free Report) , also a Zacks Rank #2 stock, has a long-term earnings growth rate of 5.5%.


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