Will Home Depot’s Upward Momentum to Continue?

Stock performance

As of June 21, Home Depot (HD) was trading at $209.39, which implies a rise of 9.7% since the announcement of its first-quarter earnings on May 21. Also, the company was trading at a premium of 32.4% from its 52-week low of $158.09 and a discount of 2.8% from its 52-week high of $215.43.

Will Home Depot’s Upward Momentum to Continue?

For the first quarter, Home Depot reported adjusted EPS of $2.27, which beat analysts’ expectation of $2.18 by 4.1%, while its revenue was marginally higher than analysts’ estimate at $26.38 billion. However, the company’s global SSSG (same-store sales growth) came in at 2.5%, falling short of analysts’ expectations of 4.2%. The company’s management had blamed the unfavorable weather conditions in February, and the decline in lumber prices for lower than expected SSSG. You can read more about Home Depot’s first-quarter performance at Key Takeaways from Home Depot’s Q1 Earnings.

Despite lower-than-expected SSSG in the first quarter, Home Depot’s stock rose. The lower unemployment rate, wage inflation, the decline in mortgage rates, and the announcement by Federal Reserve Chair Jerome Powell on June 4 that the Fed is watching the impact of global trade on the US economy and is willing to act to support growth have led to a rise in the company’s stock price.

Year-to-date stock performance

Home Depot had returned 21.9% YTD, which beat the broader equity market, where the S&P 500 Index rose 17.7% since the beginning of this year. The SPDR S&P Homebuilders ETF (XHB), which has invested 12.9% of its investment in home improvement companies, has returned 26.3% during the same period, while peer Lowe’s Companies (LOW) has returned 9.2%.