A month has gone by since the last earnings report for Home Depot (HD Quick QuoteHD - Free Report) . Shares have added about 3.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Home Depot due for a pullback? 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 Tops on Q3 Earnings and Sales on Strong Demand

Home Depot has posted third-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, robust housing market trends, and ongoing investments.

Home Depot's earnings of $3.92 per share improved 23.3% from $3.18 registered in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of $3.41.

Net sales advanced 9.8% to $36,820 million from $33,536 million in the year-ago quarter and beat the Zacks Consensus Estimate of $34,972.8 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 and its associates' dedication to serving customers.

Its overall comps grew 6.1%, with a 5.5% improvement in the United States. In the reported quarter, comps were aided by a 12.9% rise in average ticket, driven by high-value purchases by home builders. This was partly offset by a 5.5% decline in customer transactions as the demand for DIY projects remained softer than the year-ago quarter due to the lapping of the high demand environment for home-improvement projects last year. Sales per square foot rose 6.2% in the reported quarter.

In dollar terms, the gross profit increased 9.7% to $12,563 million from $11,456 million in the year-ago quarter, primarily driven by robust sales growth. This was partly offset by higher cost of goods sold. Meanwhile, gross profit margin contracted 10 basis points (bps) to 34.1% from 34.2% in the year-ago quarter.

The operating income increased 19.4% to $5,795 million, while the operating margin expanded 120 bps to 15.7%. The operating margin benefited from top-line growth, offset by gross margin contraction as well as higher SG&A and other operating expenses.

Balance Sheet and Cash Flow

Home Depot ended third-quarter fiscal 2021 with cash and cash equivalents of $5,067 million, long-term debt (excluding current maturities) of $36,712 million, and shareholders' equity of $1,035 million. In the first nine months of fiscal 2021, the company generated $13,386 million of net cash from operations.

In the first nine months of fiscal 2021, it paid out cash dividends of $5,264 million and repurchased shares worth $10,374 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.39% due to these changes.

VGM Scores

At this time, Home Depot has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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.