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Home Depot (HD - Free Report) will report its third-quarter performance before the opening bell on Tuesday, November 19. The home improvement company has seen its shares rise over 38% in 2019 and is currently hovering just below its 52-week high of $238.99. Home Depot has stoked investors over the past few quarters where it gained market share and steadily increased its profitability.

However, the firm’s Q2 report highlighted slowing revenue growth and provided a cautious forward guidance. The company is looking for a strong quarter that can send it soaring to new highs. Let’s take a closer look at the business and how it might come out of the gates for Q3.

Overview

Home Depot reported sluggish comp sales over the past six months, which exacerbated worries about the negative impact the trade war would have on the company. In addition, an unusually wet month of May combined with lumber price inflation pressured the reported results. Investors are now expecting an uptick in comp sales this quarter to hopefully make up for the sluggish growth in the second quarter.

Wall Street is hoping that the issues that hindered Home Depot’s Q2 performance aren’t permanent and just a minor roadblock on its growth runway. Investors are also expecting Home Depot to continue with its strong capital returns. CEO Craig Menear and his team are expecting to spend at least $2.5 billion on share repurchases in the second half of 2019 to bring annual buybacks up to $5 billion.

Home Depot executives also said last quarter that the fundamentals of the industry, including rising home prices and wages, are still pointing to more growth ahead. This comment suggests that management’s wary forward guidance may have just been precautionary to the volatile macroeconomic issues.

Outlook

With the macroeconomic issues still not completely settled, should investors overlook the unresolved issues plaguing Home Depot? White House economic advisor, Larry Kudlow, announced on Friday that the US and China are getting close to finally reaching a trade deal that would put an end to the market shaking skirmish. The announcement provided some light at the end of the tunnel for companies like Home Dept who have had their operations weighed down by the conflict.

Investors this week will find out whether management still has the confidence it projected back in August when it said that all the "building blocks of the financial model remain in place." Investors should look at metrics like customer traffic, sales growth, and gross profit margin that are indicative of the overall strength of the company’s operations.

Our Q3 consensus estimates forecast a bottom-line gain of 0.4% to $2.52 per share and a top-line climb of 4.33% to $27.44 billion. Comp sales for the third quarter are projected to come in at 3.9% and the average ticket is forecasted to rise 5.18% to $68.48. Looking ahead to Home Depot’s full fiscal year, our estimates predict a 2.33% jump in earnings to $10.12 per share and net sales growth of 2.25% to $110.64 billion.

Bottom Line 

Home Depot needs to report a solid performance in the third quarter to reassure Wall Street after the trade war hindered the company’s performance and overall outlook. We’ll get a good idea how Home Depot chose to navigate the rough macroeconomic landscape when the company reports its gross and operating profit margins on Tuesday.

If the home improvement giant reports a strong quarter that was able to mitigate the volatile macroeconomic environment, a new high can surely be in the cards for HD stock. For those feeling especially bullish about the company, Home Depot has accelerated its dividend payout by 444% since 2011, which can anchor shareholders if sluggish growth were to continue. Home Depot’s estimate revisions have trended higher, earning HD a Zacks Rank #2 (Buy).