Citi has reaffirmed its Buy rating on Home Depot (NYSE: NYSE:HD), maintaining a $395.00 price target. The company reported lower-than-anticipated same-store sales (SSS) for the second quarter (2Q) and reduced its SSS outlook for the second half (2H) of the fiscal year.
Despite these figures, the firm's earnings per share (EPS) performance was deemed better than expected.
Home Depot's 2Q EPS outperformed Street estimates, even though SSS fell short. This was attributed to stronger than anticipated selling, general, and administrative (SG&A) performance.
Furthermore, the adjustment to the fiscal year 2024 EPS guidance was seen as relatively positive, with only a 3% reduction at the midpoint, which is modest considering the SSS guidance was cut by 250 basis points at the midpoint. This suggests that SG&A has the capacity to mitigate the impact on EPS.
The company's management call, scheduled for 9 AM ET, is expected to shed light on various aspects of the business. The focus will be on understanding the monthly SSS during the second quarter, the quarter's exit rate, and whether the forecasts for the second half of the year are conservative.
Home Depot has reported significant shifts in its financial performance, with second-quarter earnings per share (EPS) of $4.60 surpassing estimates despite a 3.3% decline in comparable sales.
The company has adjusted its annual earnings outlook due to reduced consumer spending on home improvement projects, expecting diluted earnings per share to decrease between 2% and 4%, and annual comparable sales to fall between 3% and 4%.
Despite these challenges, Home Depot raised its total sales forecast to a range of 2.5% to 3.5% and anticipates the acquisition of SRS Distribution to close in the second half of the year, contributing approximately $6.4 billion in revenue.
InvestingPro Insights
As Citi maintains its positive stance on Home Depot (NYSE:HD) with a Buy rating, it is crucial for investors to consider the broader financial health and market performance of the company. According to InvestingPro data, Home Depot boasts a robust market capitalization of $342.91 billion and trades at a price-to-earnings (P/E) ratio of 23.03, reflecting investor confidence in its profitability. Despite a slight dip in revenue growth by -2.52% over the last twelve months as of Q1 2023, the company's gross profit margin remains strong at 33.48%, underscoring its efficiency in managing costs relative to its revenues.
Home Depot's commitment to shareholder value is evident through its consistent dividend payments, having raised its dividend for 14 consecutive years, and maintaining payouts for 38 years in total—an InvestingPro Tip that highlights the company's financial stability and dedication to returning value to its investors. Additionally, the company's dividend yield stood at a healthy 2.6% as of the last recorded date, coupled with a dividend growth of 7.66% over the last twelve months, which may appeal to income-focused investors.
For those considering adding Home Depot to their portfolio, InvestingPro offers further analysis and additional tips; in fact, there are 8 more InvestingPro Tips available for Home Depot. These insights could be critical in making an informed investment decision, especially as the company navigates through the revised sales forecasts and continues to assert its position as a prominent player in the Specialty Retail industry.
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