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Home Depot Q2 Earnings Beat Estimates as Sales & Ticket Rise
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Key Takeaways
HD's Q2 sales rose 5.7% y/y to $47.86B and adjusted EPS increased 5.1% to $4.92.
Average ticket rose 2.8% and comps gained 1.7%, even as comparable transactions fell 1%.
HD reaffirmed FY26 sales growth of 2.5-4.5% and adjusted EPS growth of 0-4%.
The Home Depot, Inc. (HD - Free Report) has delivered solid second-quarter fiscal 2026 results, with the top and bottom lines surpassing the Zacks Consensus Estimate. Adjusted earnings were $4.92 per share, up 5.1% year over year from $4.68. The figure topped the Zacks Consensus Estimate of $4.71.
Net sales rose 5.7% year over year to $47.86 billion and beat the consensus mark of $47.46 billion. Comparable sales (comps) increased 1.7%, while the comparable average ticket climbed 2.8% and comparable customer transactions declined 1.0%. Our model predicted consolidated comps growth of 1.5% for the fiscal second quarter.
This Zacks Rank #3 (Hold) company’s shares have rallied 11.7% in the past three months compared with the industry’s 10.3% growth.
Image Source: Zacks Investment Research
HD's Comparable Sales Gain as Ticket Rises
U.S. comparable sales advanced 1.3% year over year in the fiscal second quarter. The gain came as customer spending per transaction increased, while comparable transaction volume remained below the prior-year level.
Total customer transactions were 443.2 million, down 0.8% year over year, while average ticket increased to $92.50 from $90.01. Management noted that demand was broad-based with customers continuing to engage in smaller projects.
The Home Depot, Inc. Price, Consensus and EPS Surprise
Gross profit increased 6.5% year over year to $16.12 billion from $15.13 billion, supported by the higher sales. Cost of sales rose 5.3% to $31.75 billion, a slower pace than the increase in net sales, which aided the gross margin.
The gross margin expanded about 30 basis points (bps) to 33.7% from 33.4%, based on the reported sales and gross-profit figures. The spread between sales growth and cost-of-sales growth supported the year-over-year margin improvement. Our model predicted a 60-bps year-over-year decline in the gross margin to 32.8% for the fiscal second quarter.
HD's Operating Costs Rise Faster Than Sales
Selling, general and administrative (SG&A) expenses increased 8.5% year over year to $8.42 billion. Depreciation and amortization rose 5.7% to $852 million, while total operating expenses climbed 8.2% to $9.28 billion. Expense growth outpaced the pace of revenue expansion.
GAAP operating income increased 4.3% to $6.84 billion, but the operating margin slipped 20 bps to 14.3% from 14.5% in the year-ago quarter. Adjusted operating income rose 4.8% to $7.02 billion, while the adjusted operating margin edged down 10 bps to 14.7% from 14.8% in the year-ago quarter.
Our model predicted the SG&A expense rate to increase 20 bps year over year to 17.3%. We anticipated the adjusted operating income to drop 0.2% year over year and the operating margin to contract 70 bps to 14.1% for the fiscal second quarter.
Home Depot's Balance Sheet & Cash Flow
HD ended second-quarter fiscal 2026 with cash and cash equivalents of $2.09 billion, up from $1.39 billion at the start of fiscal 2026. Merchandise inventories were $26.85 billion, receivables were $6.96 billion and long-term debt, excluding current installments, stood at $43.95 billion. Stockholders' equity was $16.62 billion.
For the first six months of fiscal 2026, net cash provided by operating activities was $11.42 billion, up from $8.97 billion a year earlier. Working-capital changes contributed $570 million compared with a $1.82 billion use in the prior-year period. Capital expenditure totaled $1.72 billion, while payments for acquired businesses, net, were $1.33 billion.
Cash dividends totaled $4.64 billion for the first six months of fiscal 2026. The company also repaid $3.04 billion in long-term debt, contributing to $7.70 billion in net cash used in financing activities.
HD Reaffirms FY26 Outlook
Management reaffirmed its fiscal 2026 outlook, calling for total sales growth of 2.5-4.5% and comps growth of flat to 2%. The company also expects 15 new stores and capital expenditure of 2.5% of the total sales.
For fiscal 2026, Home Depot projects a gross margin of 33.1% and an operating margin of 12.4-12.6%, with an adjusted operating margin of 12.8-13%.
The company anticipates earnings per share to be flat to up 4% from $14.23 in the year-ago quarter. Meanwhile, adjusted earnings per share are also projected to be flat to up 4% from the $14.69 reported in the year-ago quarter.
The outlook also assumes an effective tax rate of 24.3% and net interest expenses of $2.3 billion. Guidance includes IEEPA tariff refunds, which are expected to partially offset unplanned fuel, energy and other product input costs. Adjusted earnings guidance excludes an expected after-tax impact of about 50 cents per share from acquired intangible asset amortization.
The Zacks Consensus Estimate for Alliance Laundry’s current financial-year sales and EPS indicates growth of 6.7% and 28.4%, respectively, from the year-ago reported numbers. ALH delivered a trailing four-quarter earnings surprise of 19.7%, on average.
Dollar Tree Inc. (DLTR - Free Report) is an operator of discount variety stores offering a broad assortment of everyday consumables and discretionary merchandise. The company currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and EPS indicates growth of 6.5% and 21.7%, respectively, from the year-ago reported numbers. DLTR delivered a trailing four-quarter earnings surprise of 32.1%, on average.
Dollar General Corporation (DG - Free Report) is one of the largest discount retailers in the United States, selling low-priced merchandise, typically $10 or less. The company currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for Dollar General’s current financial-year sales and EPS is expected to rise 3.9% and 7.6%, respectively, from the year-ago reported figures. DG delivered a trailing four-quarter earnings surprise of 21%, on average.
View the Zacks #1 Rank List
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Home Depot Q2 Earnings Beat Estimates as Sales & Ticket Rise
Key Takeaways
The Home Depot, Inc. (HD - Free Report) has delivered solid second-quarter fiscal 2026 results, with the top and bottom lines surpassing the Zacks Consensus Estimate. Adjusted earnings were $4.92 per share, up 5.1% year over year from $4.68. The figure topped the Zacks Consensus Estimate of $4.71.
Net sales rose 5.7% year over year to $47.86 billion and beat the consensus mark of $47.46 billion. Comparable sales (comps) increased 1.7%, while the comparable average ticket climbed 2.8% and comparable customer transactions declined 1.0%. Our model predicted consolidated comps growth of 1.5% for the fiscal second quarter.
This Zacks Rank #3 (Hold) company’s shares have rallied 11.7% in the past three months compared with the industry’s 10.3% growth.
Image Source: Zacks Investment Research
HD's Comparable Sales Gain as Ticket Rises
U.S. comparable sales advanced 1.3% year over year in the fiscal second quarter. The gain came as customer spending per transaction increased, while comparable transaction volume remained below the prior-year level.
Total customer transactions were 443.2 million, down 0.8% year over year, while average ticket increased to $92.50 from $90.01. Management noted that demand was broad-based with customers continuing to engage in smaller projects.
The Home Depot, Inc. Price, Consensus and EPS Surprise
The Home Depot, Inc. price-consensus-eps-surprise-chart | The Home Depot, Inc. Quote
Home Depot's Gross Profit Expands
Gross profit increased 6.5% year over year to $16.12 billion from $15.13 billion, supported by the higher sales. Cost of sales rose 5.3% to $31.75 billion, a slower pace than the increase in net sales, which aided the gross margin.
The gross margin expanded about 30 basis points (bps) to 33.7% from 33.4%, based on the reported sales and gross-profit figures. The spread between sales growth and cost-of-sales growth supported the year-over-year margin improvement. Our model predicted a 60-bps year-over-year decline in the gross margin to 32.8% for the fiscal second quarter.
HD's Operating Costs Rise Faster Than Sales
Selling, general and administrative (SG&A) expenses increased 8.5% year over year to $8.42 billion. Depreciation and amortization rose 5.7% to $852 million, while total operating expenses climbed 8.2% to $9.28 billion. Expense growth outpaced the pace of revenue expansion.
GAAP operating income increased 4.3% to $6.84 billion, but the operating margin slipped 20 bps to 14.3% from 14.5% in the year-ago quarter. Adjusted operating income rose 4.8% to $7.02 billion, while the adjusted operating margin edged down 10 bps to 14.7% from 14.8% in the year-ago quarter.
Our model predicted the SG&A expense rate to increase 20 bps year over year to 17.3%. We anticipated the adjusted operating income to drop 0.2% year over year and the operating margin to contract 70 bps to 14.1% for the fiscal second quarter.
Home Depot's Balance Sheet & Cash Flow
HD ended second-quarter fiscal 2026 with cash and cash equivalents of $2.09 billion, up from $1.39 billion at the start of fiscal 2026. Merchandise inventories were $26.85 billion, receivables were $6.96 billion and long-term debt, excluding current installments, stood at $43.95 billion. Stockholders' equity was $16.62 billion.
For the first six months of fiscal 2026, net cash provided by operating activities was $11.42 billion, up from $8.97 billion a year earlier. Working-capital changes contributed $570 million compared with a $1.82 billion use in the prior-year period. Capital expenditure totaled $1.72 billion, while payments for acquired businesses, net, were $1.33 billion.
Cash dividends totaled $4.64 billion for the first six months of fiscal 2026. The company also repaid $3.04 billion in long-term debt, contributing to $7.70 billion in net cash used in financing activities.
HD Reaffirms FY26 Outlook
Management reaffirmed its fiscal 2026 outlook, calling for total sales growth of 2.5-4.5% and comps growth of flat to 2%. The company also expects 15 new stores and capital expenditure of 2.5% of the total sales.
For fiscal 2026, Home Depot projects a gross margin of 33.1% and an operating margin of 12.4-12.6%, with an adjusted operating margin of 12.8-13%.
The company anticipates earnings per share to be flat to up 4% from $14.23 in the year-ago quarter. Meanwhile, adjusted earnings per share are also projected to be flat to up 4% from the $14.69 reported in the year-ago quarter.
The outlook also assumes an effective tax rate of 24.3% and net interest expenses of $2.3 billion. Guidance includes IEEPA tariff refunds, which are expected to partially offset unplanned fuel, energy and other product input costs. Adjusted earnings guidance excludes an expected after-tax impact of about 50 cents per share from acquired intangible asset amortization.
Key Picks in the Retail Space
Alliance Laundry Holdings Inc. (ALH - Free Report) , which is the world's largest designer and manufacturer of commercial laundry systems, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Alliance Laundry’s current financial-year sales and EPS indicates growth of 6.7% and 28.4%, respectively, from the year-ago reported numbers. ALH delivered a trailing four-quarter earnings surprise of 19.7%, on average.
Dollar Tree Inc. (DLTR - Free Report) is an operator of discount variety stores offering a broad assortment of everyday consumables and discretionary merchandise. The company currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and EPS indicates growth of 6.5% and 21.7%, respectively, from the year-ago reported numbers. DLTR delivered a trailing four-quarter earnings surprise of 32.1%, on average.
Dollar General Corporation (DG - Free Report) is one of the largest discount retailers in the United States, selling low-priced merchandise, typically $10 or less. The company currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for Dollar General’s current financial-year sales and EPS is expected to rise 3.9% and 7.6%, respectively, from the year-ago reported figures. DG delivered a trailing four-quarter earnings surprise of 21%, on average.