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Will Home Depot (HD) Continue Its Earnings Beat Streak in Q3?

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The Home Depot, Inc. (HD - Free Report) is expected to register top and bottom-line growth when it reports third-quarter fiscal 2021 results on Nov 16, before market open. The Zacks Consensus Estimate for its fiscal third-quarter earnings of $3.33 per share suggests growth of 4.7% 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 $34.54 billion, indicating an increase of 3% from the figure reported in the year-ago quarter.

The leading home improvement retailer delivered an earnings surprise of 9.2% 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 third-quarter fiscal 2021 performance is expected to have benefited from the continued demand for home improvement projects, the robust housing market and 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 sales performance in the fiscal third quarter. The company has been witnessing strong growth in its Pro and DIY customer categories, and continued digital momentum, which are anticipated 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.

The company 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 its sales and earnings performance in the fiscal third 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 highlighted that consumers are focusing on larger projects, aiding growth in sales from the company’s Pro customers. Continued sales growth from Pros, driven by robust project demand, is likely to have aided sales in the fiscal third quarter.

However, the company is anticipated to have witnessed a soft gross margin performance in the fiscal third quarter, owing to the increased penetration of lumber products in its sales mix. Continued pressure from higher transportation costs and supply-chain investments are also expected to have hurt the gross margin in the fiscal third 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. 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 #2 and an Earnings ESP of +0.93%.

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:

Beacon Roofing Supply (BECN - Free Report) currently has an Earnings ESP of +6.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Foot Locker (FL - Free Report) presently has an Earnings ESP of +11.08% and a Zacks Rank #3.

DICK’S Sporting (DKS - Free Report) currently has an Earnings ESP of +17.35% and a Zacks Rank #3.

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