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Can Home Depot’s 2Q17 Earnings Outperform Analysts’ Estimates?

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Can Home Depot’s 2Q17 Earnings Outperform Analysts’ Estimates? PART 1 OF 6

Will Home Depot Stock Get a Boost from 2Q17 Earnings?

HD stock performance

The largest home improvement retailer in the world, Home Depot (HD), is scheduled to announce its 2Q17 earnings before the market opens on August 15, 2017. At the end of 1Q17, the company was operating 2,281 stores.

Will Home Depot Stock Get a Boost from 2Q17 Earnings?

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In 1Q17, Home Depot posted adjusted EPS (earnings per share) of $1.67 on revenue of $23.9 billion. Analysts were expecting EPS of $1.62 on revenues of $23.7 billion. After strong 1Q17 earnings, the company’s management raised its 2017 EPS guidance to $7.15 from an earlier estimate of $7.13. The better-than-expected 1Q17 earnings and raised EPS guidance for 2017 led to a rise in HD stock. However, on July 20, 2017, Sears Holdings (SHLD) announced that it would start selling its Kenmore appliances through Amazon (AMZN). Amazon’s entry into the appliances sector is expected to curb the pricing power of home improvement retailers, thus lowering their profitability. The announcement of the deal thus led to a fall in Home Depot stock. As of August 9, 2017, Home Depot was trading at $155.26, which represents a fall of 1.3% since its 1Q17 earnings release on May 16, 2017.

Year-to-date performance

Despite the recent fall, 2017 has been a good year for Home Depot. The stock has risen 15.8% since the beginning of 2017. During the same period, its peers Lowe’s Companies (LOW), Bed Bath & Beyond (BBBY), and Williams-Sonoma (WSM) have returned 10.2%, -26.7%, and -3.7%, respectively.

The broader comparative indexes, the S&P 500 Index (SPX-INDEX) and the SPDR S&P Homebuilders ETF (XHB), have returned 10.5% and 14.5%, respectively, year-to-date.

Series overview

With Home Depot’s 2Q17 earnings around the corner, we’ll look at analysts’ revenue and earnings estimates in this series. We’ll also cover management’s 2017 guidance and analysts’ estimates for the next four quarters. Finally, we’ll wrap it up by looking at the company’s valuation multiple and analysts’ recommendations.

Let’s start by looking at analysts’ revenue estimates for 2Q17.

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