Why Investors Are Optimistic about Home Depot's 3Q17 Earnings

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Why Investors Are Optimistic about Home Depot's 3Q17 Earnings PART 1 OF 5

Why Investors Are Optimistic about Home Depot’s 3Q17 Earnings

Stock performance

Home Depot (HD), the largest home improvement retailer in the world, is scheduled to announce its 3Q17 earnings before the market opens on November 14, 2017.

Why Investors Are Optimistic about Home Depot&#8217;s 3Q17 Earnings

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Investors are expecting the recovery efforts after the devastation caused by Hurricane Harvey and Hurricane Irma to drive Home Depot’s sales in 3Q17. In fiscal 2Q17, Home Depot outperformed analysts’ EPS and revenue estimates. After posting strong 2Q17 earnings, Home Depot’s management raised its 2017 EPS guidance to $7.29 from an earlier estimate of $7.15. Along with these factors, the rise in the national housing price index and an increase in home turnover appears to have increased investors’ confidence, leading to a rise in the company’s stock price. As of November 9, 2017, Home Depot was trading at $163.27, which represents a rise of 5.8% since the announcement of its 2Q17 earnings on August 15, 2017.

Year-to-date performance

2017 has been a good year for Home Depot with its stock price returning 21.8%. During the same period, peers Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 9.8%, 1.2%, and -50.4%, respectively.

The SPDR S&P Homebuilders ETF (XHB) and the S&P 500 Index (SPX) have returned 20.6% and 15.4%, respectively. XHB invests approximately 25% of its holdings in home furnishing and home improvement companies.

Series overview

With Home Depot’s 3Q17 earnings around the corner, we’ll look at analysts’ estimated revenue, margins, and EPS. We’ll also cover the management’s 2017 guidance and analysts’ estimates for the next four quarters. Finally, we’ll look at the company’s valuation multiple and analysts’ recommendations.

Let’s start our analysis by looking at analysts’ revenue estimates.


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