Residence Depot Might Hit New All-Time Excessive on Sturdy Q1 Earnings

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Residence Depot Inc, the most important house enchancment retailer in the US, is predicted to report its first-quarter earnings of $2.99 per share, which represents year-over-year development of about 44% from $2.08 per share seen in the identical interval a yr in the past.

The house enchancment retailer would publish income development of 21% to $34.2 billion. Within the final 4 quarters, on common, Residence Depot has crushed earnings estimates about 2%.

Nonetheless, the Atlanta, Georgia-based firm’s shares traded about 4% decrease at $328.67 on Tuesday. The inventory rose over 23% thus far this yr. Residence Depot’s better-than-expected outcomes, which shall be introduced on Might 18, would assist the inventory hit new all-time highs.

However the inventory’s efficiency may hinge on margins.

Analyst Feedback

“We anticipate a 25% to 30% Q1’21 comp as top-line power seemingly continued by the quarter. We mannequin gross margin down 40 bps. For context, in This fall lumber inflation pulled gross margin down ~30 bps and sure worsened sequentially. On SG&A, assuming the per sq ft 2-year stack holds from This fall (+24%), SG&A ought to lever 360 to 400 bps. In our mannequin, this mix produces EPS of $3.55 to $3.85 vs consensus at $2.95. Whereas a ’21 information was not offered, if the ’20 top-line exit charge held by ’21, HD would anticipate a flat to barely optimistic comp and an EBIT margin of at the very least 14%,” famous Simeon Gutman, fairness analyst at Morgan Stanley.

“We imagine traits have accelerated QTD relative to the ’20 exit charge, which implies HD needs to be monitoring above this framework. Flowing by the anticipated Q1 comp beat and adjusting different ’21 quarters for a decelerating 2-year stack (31%/25%/20%/20% with a 25% Q1 comp, 36%/27%/22%/20% with a 30% Q1 comp), our mannequin produces a full yr ’21 comp of 5% to 7.5%. This units up HD for a robust “comp the comp” yr. Nonetheless, if this happens, it may imply some income will get pulled ahead from ’22, creating harder compares.”

Residence Depot Inventory Value Forecast

Sixteen analysts who provided inventory scores for Residence Depot within the final three months forecast the common worth in 12 months of $341.36 with a excessive forecast of $375.00 and a low forecast of $310.00.

The typical worth goal represents a 3.84% enhance from the final worth of $328.75. Of these 16 analysts, 14 rated “Purchase”, two rated “Maintain” whereas none rated “Promote”, in keeping with Tipranks.

Morgan Stanley raised the bottom goal worth to $340 from $320 with a excessive of $420 below a bull state of affairs and $205 below the worst-case state of affairs. The agency gave an “Obese” ranking on the house enchancment retailer’s inventory.

A number of different analysts have additionally up to date their inventory outlook. JP Morgan raised the goal worth to $355 from $330. UBS lifted the goal worth to $375 from $350. Wells Fargo upped the worth goal to $360 from $330. Citigroup elevated the worth goal to $375 from $288.

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