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Could Home Depot Turn Around this Year?

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Stock performance

Last year was tough for home improvement retailers, including Home Depot (HD), whose stock price fell 9.3%. The stock fell despite Home Depot beating analysts’ EPS expectations in the first three quarters of 2018, as investors grew skeptical about increased interest rates and the weak housing market. Weakness in broader equity markets—the S&P 500 fell 6.2%—didn’t help, either.

In comparison, peers Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) fell 0.6%, 2.4%, and 48.5% last year, respectively, and the SPDR S&P Homebuilders ETF (XHB) fell 26.5%.

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However, Home Depot started this year on a brighter note. As of January 11, the stock had risen 4.4% this year, to $179.41. December’s surge in job growth and wage inflation and the Fed toning down its aggressive rate hike stance appear to have increased investors’ confidence, boosting the company’s stock price. This year, Lowe’s, Williams-Sonoma, and Bed Bath & Beyond have risen 5.3%, 4.7%, and 34.5%, respectively, and the SPDR S&P Homebuilders ETF has risen 8.8%.

Series overview

In this series, we’ll compare Home Depot’s valuation with peers’, and discuss analysts’ revenue and EPS expectations for 2018 and 2019. Let’s first look at analysts’ recommendations for Home Depot.

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