The Home Depot, Inc. (HD Quick QuoteHD - Free Report) reported solid second-quarter fiscal 2023 results, wherein both the top and the bottom lines exceeded the Zacks Consensus Estimate but declined year over year. Results gained from strength in categories associated with smaller projects. On the flip side, continued pressure in certain big-ticket, discretionary categories acted as a deterrent.

Home Depot's earnings of $4.65 per share declined 8% from $5.05 registered in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate of $4.46.

Net sales fell 2% to $42,916 million from $43,792 million in the year-ago quarter. The metric beat the Zacks Consensus Estimate of $42,248 million.

Home Depot's comparable sales fell 2% in the reported quarter. The company’s comparable sales in the United States declined 2%. Comps were impacted by a decline in customer transactions, partly offset by a rise in average ticket. Customer transactions declined 1.8% year over year, while the average ticket rose 0.1%. Sales per retail square foot were down 2.3%.  

In dollar terms, the gross profit dipped 2.3% to $14,157 million from $14,483 million in the year-ago quarter. Operating income fell 8.6% year over year to $6,589 million.

Selling, general and administrative expenses of $6,915 million grew 3.9% from the $6,657 million reported in the year-ago quarter.

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This Zacks Rank #3 (Hold) company’s shares have gained 16.9% in the past three months compared with the industry's growth of 14.1%.

Other Updates

Home Depot ended second-quarter fiscal 2023 with cash and cash equivalents of $2,814 million, long-term debt (excluding current installments) of $40,754 million, and shareholders' equity of $1,335 million. In the six months ending Jul 30, 2023, the company generated $12,205 million of net cash from operations.

Also, it approved a new $15 billion share repurchase program valid from Aug 15, 2023.

Fiscal 2023 View

Management retained its view for fiscal 2023. Home Depot anticipates sales and comparable sales to decline 2-5% year over year in fiscal 2023. The operating margin is estimated in the range of 14-14.3%.

The company expects an effective tax rate of 24.5% in fiscal 2023. Interest expenses are likely to be $1.8 billion in fiscal 2023. HD estimates earnings per share to decline 7-13% year over year in fiscal 2023.

Stocks to Consider

Some better-ranked companies are BJ's Restaurants (BJRI Quick QuoteBJRI - Free Report) , Urban Outfitters (URBN Quick QuoteURBN - Free Report) and Walmart (WMT Quick QuoteWMT - Free Report) .

BJ's Restaurants, which operates a chain of high-end casual dining restaurants in the United States, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s levels. The company has a trailing four-quarter earnings surprise of 121.2%, on average.

Urban Outfitters, which engages in the retail and wholesale of general consumer products, currently sports a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.

The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.

Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.

The Zacks Consensus Estimate for Walmart’s current financial-year sales suggests growth of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.