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Home Depot Q2 Preview: Can Shares Uphold Recent Strength?

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The Zacks Building Products – Retail Industry has been strong over the last month, gaining nearly 10% and outperforming the S&P 500. Still, the industry is down a deep 22% year-to-date. Below is a table illustrating the industry’s performance vs. the S&P 500 over several timeframes.

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A titan in the industry, Home Depot (HD - Free Report) , is on deck to reveal Q2 earnings before market open on Tuesday, August 16th.

Home Depot is the world’s largest home improvement specialty retailer, offering a diverse range of branded and proprietary home improvement items, building materials, lawn and garden products, décor products, and related services.

How does the company shape up heading into its quarterly release? Let’s take a closer glance.

Share Performance & Valuation

HD shares have tumbled year-to-date, declining more than 20% in value and vastly underperforming the S&P 500.

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However, Home Depot shares have tacked on a rock-solid 7% over the last three months, outperforming the S&P 500 by a fair margin.

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Image Source: Zacks Investment Research

Home Depot’s forward earnings multiple resides nicely at 18.9X, well below its five-year median of 21.9X but representing a slight 15% premium relative to its Zacks Industry.

HD carries a Style Score of a B for Value.

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Quarterly Estimates

Analysts have been primarily bullish for the quarter to be reported, with two positive estimate revisions hitting the tape over the last 60 days. In addition, the Zacks Consensus EPS Estimate of $4.95 represents a rock-solid 9.3% uptick in quarterly earnings year-over-year.

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The growth doesn’t stop there – Home Depot is forecasted to have generated a mighty $43.4 billion in revenue throughout the quarter, translating to year-over-year quarterly revenue growth of 5.4%.

Quarterly Performance & Market Reactions

Home Depot has been on an impressive earnings streak, chaining together nine consecutive bottom-line beats. Just in its latest quarter, the company exceeded the Zacks Consensus EPS Estimate by a sizable 11.4%.

Top-line results have also been remarkable – Home Depot has registered ten consecutive revenue beats. Below is a chart illustrating the company’s revenue on a quarterly basis.

Zacks Investment Research
Image Source: Zacks Investment Research

It’s worth noting that the market hasn’t been impressed with the company’s quarterly results as of late, with shares moving downwards five times over its last six prints.

Putting Everything Together

Home Depot shares have outperformed the general market over the last three months but still reside deep in the red year-to-date.

In addition, the company sports solid valuation levels, with shares trading well below their five-year median.

Quarterly estimates reflect solid growth, and the company has consistently reported quarterly results above estimates. However, the market hasn’t reacted well as of late following the recent prints.

Heading into the release, Home Depot (HD - Free Report) carries a Zacks Rank #3 (Hold) with an Earnings ESP Score of 0.5%.

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