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Has Home Depot’s Stock Price Bottomed Out?

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Stock performance

On March 27, 2018, Home Depot (HD) was trading at $174.68, a fall of 6.6% since its announcement of its 4Q17 earnings on February 20, 2018.

In 4Q17, Home Depot posted adjusted EPS (earnings per share) of $1.69 on revenue of $23.9 billion. Analysts were expecting the company to post EPS of $1.61 on revenue of $23.7 billion. Also, the company outperformed analysts’ SSSG (same-store sales growth) estimate of 6.0%, posting SSSG of 7.5%. 

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Despite its posting better-than-expected 4Q17 earnings, the company’s stock price fell due to weak SSSG guidance provided by its management and weakness in the broader equity market due to the rumblings of a trade war between the United States and China. The company’s management has set its 2018 SSSG guidance to 5.0%—lower than analysts’ expectations.

Year-to-date performance

2017 was a good year for Home Depot, with its stock price rising 41.4%. However, since the beginning of 2018, the company’s stock price has fallen 7.8%. Comparatively, the stock prices of Home Depot’s peers Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have fallen 7.5%, 0.6%, and 7.9%, respectively. The stock prices of the S&P 500 Index and the SPDR S&P Homebuilders ETF (XHB) have fallen 2.3% and 8.9%, respectively.

Series overview

In this series, we’ll look at analysts’ expectations and management’s guidance for 2018. We’ll end the series by looking at the company’s valuation multiple and analysts’ recommendations.

Let’s start by looking at analysts’ revenue expectations for HD.

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