Home Depot’s Strong 2Q17 Earnings Still Have Investors Wary



2Q17 performance

The largest home improvement retailer in the world, Home Depot (HD), announced its 2Q17 earnings on August 15, 2017. It posted adjusted EPS (earnings per share) of $2.25 on revenues of $28.1 billion. Compared to 2Q16, EPS rose 14.2%, while revenues rose 6.2%.

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Stock performance

Analysts were expecting Home Depot to post EPS of $2.22 on revenues of $27.8 billion. After strong 2Q17 earnings, the company’s management has increased its 2017 EPS guidance to $7.29 from an earlier estimate of $7.15. Despite a strong 2Q17 performance and raising its EPS guidance, HD stock fell due to fears that Amazon (AMZN) was entering the appliance sector. Investors believe that will curb the pricing power of home improvement retailers, thus lowering their profitability. On August 16, 2017, Home Depot (HD) was trading at $152.25, which represents a fall of 1.3% since the announcement of its 2Q17 earnings.

Year-to-date performance

Despite the recent fall, Home Depot stock has risen 13.6% since the beginning of 2017. During the same period, its peers Lowe’s Companies (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 5.9%, -7.7%, and -31.7%, respectively.

Notably, the broader comparative indexes such as the Consumer Discretionary Select Sector SPDR ETF (XLY) and the S&P 500 Index (SPX-INDEX) have returned 10.7% and 10.2%, respectively. XLY has invested more than 9.5% in home improvement retailers.

Series overview

In this series, we’ll look at Home Depot’s 2Q17 earnings call and compare its performance with analysts’ estimates. We’ll also cover management’s 2017 guidance and analysts’ estimate for the next four quarters. Finally, we’ll wrap up the series by looking at the company’s valuation multiple and analysts’ recommendations.

Next, let’s take a look at Home Depot’s 2Q17 revenue growth.


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