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Why Is Home Depot (HD) Down 1.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Home Depot (HD - Free Report) . Shares have lost about 1.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Home Depot Q1 Earnings Surpass, Sales Miss Estimates

Home Depot has reported first-quarter fiscal 2024 results, wherein earnings surpassed the Zacks Consensus Estimate, while sales missed. Meanwhile, the company’s top and bottom lines declined year over year in the first quarter of fiscal 2024.

Results for the quarter have mainly been impacted by a delayed start to the spring season, as well as continued demand softness for certain larger discretionary projects. However, the company benefited from its store readiness and product assortments in stores and online.

Nonetheless, HD is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best interconnected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this space.

Q1 Details

Home Depot's earnings of $3.63 per share declined 5% from $3.82 in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate of $3.61.

Net sales declined 2.3% to $36,418 million from $37,257 million in the year-ago quarter. Also, sales missed the Zacks Consensus Estimate of $36,654 million.

Home Depot's comparable sales fell 2.8% in the reported quarter. The company’s comparable sales in the United States declined 3.2% in the fiscal first quarter. Comps were impacted by a decrease in customer transactions and average tickets. In the fiscal first quarter, customer transactions declined 1% year over year, whereas the average ticket was down 1.3%. Sales per retail square foot fell 3.4% in the reported quarter.  

Our model predicted comps to decline 2.3% in first-quarter fiscal 2024 due to continued headwinds related to lumber and copper deflation. We expected the comps decline to be led by a 1.5% dip in the number of customer transactions and a 1.2% fall in average ticket.

In dollar terms, the gross profit decreased 1% year over year to $12,433 million in the fiscal first quarter. However, the gross margin of 34.1% expanded 40 basis points (bps) year over year in the reported quarter. The operating income fell 8.5% year over year to $5,079 million, while the operating margin of 13.9% contracted 100 bps year over year. The decline in the operating margin mainly resulted from higher SG&A expenses, as a percentage of sales, offset by an improved gross margin.

SG&A expenses of $6,667 million increased 4.9% from the $6,355 million reported in the year-ago quarter. SG&A expenses, as a percentage of sales, increased 120 bps year over year to 18.3%.

Our model predicted the SG&A expense rate to increase 50 bps year over year to 17.6%. Consequently, we anticipated the operating income to decline 6.3% year over year and the operating margin to contract 70 bps to 14.2% for the fiscal first quarter.

Other Updates

Home Depot ended first-quarter fiscal 2024 with cash and cash equivalents of $4,264 million, a long-term debt (excluding current installments) of $42,060 million, and shareholders' equity of $1,820 million. In the first three months of fiscal 2024, the company generated $5,497 million of net cash from operations.

FY24 View

Management has retained its view for fiscal 2024. It notes that the company’s fiscal 2024 will include an additional 53rd week. Home Depot anticipates sales to increase 1% year over year for fiscal 2024, including $2.3 billion of sales contribution from the 53rd week. The company expects comparable sales to decline 1% for the 52-week period.

HD expects to open 12 stores for fiscal 2024. It estimates the gross margin for fiscal 2024 to be 33.9%, with an operating margin of 14.1%.

The company expects an effective tax rate of 24.5% for fiscal 2024. Interest expenses are likely to be $1.8 billion for fiscal 2024. HD estimates earnings per share to increase 1% year over year for fiscal 2024. It expects the 53rd week to contribute 30 cents per share to earnings in fiscal 2024.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Home Depot has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, Home Depot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Home Depot belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Beacon Roofing Supply (BECN - Free Report) , has gained 2.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

Beacon Roofing reported revenues of $1.91 billion in the last reported quarter, representing a year-over-year change of +10.4%. EPS of $0.41 for the same period compares with $0.67 a year ago.

Beacon Roofing is expected to post earnings of $2.83 per share for the current quarter, representing a year-over-year change of +6.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.

Beacon Roofing has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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