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Here's Why Home Depot (HD) Looks Poised to Beat Earnings in Q2

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The Home Depot, Inc. (HD - Free Report) is expected to register top and bottom-line growth when it reports second-quarter fiscal 2021 results on Aug 17, before market open. The Zacks Consensus Estimate for its fiscal second-quarter earnings of $4.41 per share suggests growth of 9.7% from the year-ago period’s reported figure. The consensus estimate has moved up by a penny in the past seven days.

The consensus mark for quarterly revenues is pegged at $40.68 billion, indicating an increase of 6.9% from the figure reported in the year-ago quarter.

The leading home improvement retailer delivered an earnings surprise of 9.9% in the last four quarters, on average.

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

Key Factors to Note

Home Depot’s second-quarter fiscal 2021 results are likely to have benefited from continued strong demand for home improvement projects as well as ongoing investments. The company has been 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.

Strength across its business and geographies is expected to have boosted comparable sales (comps) performance in the fiscal second quarter. It has been witnessing strong growth in its Pro and DIY customer categories and continued digital momentum, which are likely to have continued in the to-be-reported quarter. The interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters.

It has also 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 second quarter.

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 continued sales growth from Pros as project demand was strong and their backlogs were growing.

The company has been on track with its strategic 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 second-quarter results are likely to reflect gains from its efforts to provide a differentiated Pro ecosystem, with deeper engagement with Pro customers.

However, increased penetration of lumber products in the company’s sales mix continued, and constant pressure from shrink and higher transportation costs are likely to have hurt gross margin in the fiscal second quarter.

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 +1.24%.

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:

The Gap, Inc. (GPS - Free Report) has an Earnings ESP of +53.66% and it currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nordstrom, Inc. (JWN - Free Report) presently has an Earnings ESP of +1.61% and a Zacks Rank #2.

DICK’S Sporting Goods, Inc. (DKS - Free Report) currently has an Earnings ESP of +1.66% and a Zacks Rank #2.

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