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Will Home Depot’s Q2 2018 Earnings Boost Its Stock Price?



Stock performance

Home Depot (HD) is scheduled to post its second-quarter earnings before the market opens on August 14. On August 6, the company was trading at $195.69, which represents a rise of 2.4% since the announcement of its first-quarter earnings on May 15.

In the first quarter, Home Depot posted adjusted EPS of $2.08, outperforming analysts’ expectations of $2.05. However, its revenue of $24.95 billion fell short of analysts’ expectation of $25.15 billion. Also, the company’s SSSG (same-store sales growth) of 4.2% was lower than analysts’ expectation of 5.4%. The lower-than-expected revenue and SSSG led the company’s stock price to fall to $184.01 on May 30.

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However, the increase in home prices, the lower unemployment rate, and increasing wages have led to a rise in the company’s stock price. Investors expected the increases in home prices would prompt homeowners to renovate their houses and drive home improvement retailers’ sales. Also, the measures that the company’s management adopted such as the enhancement of the customer experience through the implementation of technological advancements and investing in its supply-chain to speed up its delivery service have also contributed to raising the company’s stock price.

Year-to-date performance

Since the beginning of 2018, Home Depot’s stock price has risen 3.3%. During the same period, Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 5.2%, 12.1%, and -15.6%, respectively. Meanwhile, the SPDR S&P 500 ETF (SPY) and the SPDR S&P Homebuilders ETF (XHB) have returned 6.6% and -10.6%, respectively.

Series overview

With Home Depot’s second-quarter earnings around the corner, we’ll look at analysts’ revenue and EPS expectations for the quarter. We’ll also cover management’s 2018 guidance and analysts’ estimates for the next four quarters. Finally, we’ll end this series by looking at the company’s valuation multiple and analysts’ recommendations.

First, let’s start by looking at analysts’ revenue estimate for the second quarter.


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