It has been about a month since the last earnings report for Home Depot (
HD Quick Quote HD - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Home Depot due for a breakout? 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 Beats on Earnings in Q4, Dividend Raised
Home Depot posted fourth-quarter fiscal 2022 results, with the top and bottom line increasing year over year. Earnings surpassed the Zacks Consensus Estimate while sales missed the Zacks Consensus Estimate.
Home Depot's earnings of $3.30 per share increased 2.8% from $3.21 registered in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of $3.27 and our estimate of $3.19. Net sales inched up 0.3% to $35,831 million from $35,719 million in the year-ago quarter. The metric missed the Zacks Consensus Estimate of $35,905.8 million but surpassed our estimate of $35,761.2 million. Comparable sales inched down 0.3% in the reported quarter. The company’s comparable sales in the U.S. also went down 0.3%. Home Depot's customer transactions declined 6% year over year. The average ticket rose 5.8%, while sales per retail square foot fell 0.1%. In dollar terms, the gross profit increased 0.5% to $11,926 million from $11,862 million in the year-ago quarter. The operating income fell 1.5% to $4,752 million. Selling, general and administrative expenses came in at $6,549 million, up 1.8% from $6,431 million reported in the year-ago quarter. Other Updates
The company ended fourth-quarter fiscal 2022 with cash and cash equivalents of $2,757 million, long-term debt (excluding current installments) of $41,962 million, and shareholders' equity of $1,562 million. For the fiscal year ended Jan 29, 2023, the company generated $14,615 million of net cash from operations.
The company approved a 10% hike in its quarterly dividend to $2.09 per share, which equals to an annual dividend of $8.36 per share. The dividend is payable on Mar 23, 2023, to shareholders of record as on Mar 9. This marks the company’s 144th consecutive quarter of dividend payments. Starting in the first quarter of fiscal 2023, the company will invest an incremental $1 billion in annualized compensation for frontline, hourly associates. Fiscal 2023 View
Home Depot anticipates sales growth and comparable sales growth to be roughly flat year over year in fiscal 2023. The operating margin rate is estimated to be 14.5%. It expects an effective tax rate of 24.5%. HD estimates earnings per share decline in the mid-single digits for fiscal 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -6.19% due to these changes.
Currently, Home Depot has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Home Depot has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.