Should You Buy Home Depot Stock Despite Weak Guidance?

Image Source: HomeDepot.com


Shares of Home Depot Inc (NYSE: HD) are down nearly 4.0% on Tuesday even though the home improvement retailer reported better-than-expected earnings for its fiscal first quarter.


Home Depot stock down on a hit to revenue

The stock is also taking a hit this morning because the quarterly revenue came in well below Street estimates. Still, on CNBC’s “Squawk Box”, Oppenheimer’s Brian Nagel said:

A clear sales miss in the first quarter. Now, a lot of that seemed to be weather and lumber prices which are probably shorter term in nature. Nonetheless, they now have a more dampened view of 2023.

Other notable figures in the earnings release include customer transactions that were down 4.8% versus the previous year while average ticket per transaction edged up 0.2% only.

Home Depot stock is down more than 15% versus its year-to-date high at writing.


Is Home Depot stock worth buying?

Also a negative was the guidance that Home Depot slashed today that suggests softening consumer demand.

The multinational now expects up to a 13% hit to its per-share earnings this year on a 2.0% to 5.0% decline in sales – its first year-on-year decline in those metrics since fiscal 2009. According to the Oppenheimer analyst:

It’s a weak report. [But] this is happening against a very concerned backdrop towards consumer. As weather got more spring-like, you’ve seen sales pick up. So, I don’t think that’s going to be a big pause for the stock today.

Nagel currently has a price target of $400 on the Home Depot stock that signals a whopping 40% upside from here.


Notable figures in Home Depot Q1 earnings release

  • Net income printed at $3.87 billion versus the year-ago $4.32 billion
  • Per-share earnings also tanked significantly from $4.09 to $3.87
  • Sales slipped 4.2% on a year-over-year basis to $37.26 billion
  • FactSet consensus was $3.80 a share on $38.31 billion in revenue
  • Comparable sales down 4.5% were way worse than Street estimates

Home Depot expects operating margin to sit between 14% and 14.3% in 2023. Nagel added:

EPS beat expectations that’s a testament to HD managing well in a softer sales environment. It’s an underlying positive. And we’ve actually seen better housing data lately.


More By This Author:

The Pound Is Recovering But UK Faces Uncertainty (GBP/USD)
US Dollar Analysis After Hitting A 5-week High
Jim Cramer On Apple stock: Apple Can Easily Blow To $200

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Roger Keats 1 year ago Member's comment

a conclusion?