A man shops for supplies at a Home Depot store in Alhambra, California. (Photo by FREDERIC J. BROWN/AFP via Getty Images)
Home Depot reported second-quarter earnings $5.05 a share, topping analysts’ estimates, and reaffirmed its 2022 guidance.
But Home Depot (ticker: HD) shares fell 1.3% in premarket trading to $310.50 after customer transactions declined 3% in the period, and the company’s full-year outlook could imply lower-than-hoped earnings. Coming into Tuesday, the stock has fallen 24.2% this year.
Sales in the quarter were $43.8 billion, up 6.5% from a year earlier.
Analysts surveyed by FactSet had expected the largest home-improvement retailer to report quarterly earnings of $4.95 a share on sales of $43.4 billion.
A year earlier, Home Depot earned $4.53 a share on sales of $41.1 billion.
Same-store sales rose 5.8%, ahead of estimates of 4.9%. U.S. same-store sales jumped 5.4% despite a slowdown in the housing market.
“In the second quarter, we delivered the highest quarterly sales and earnings in our company’s history,” said Ted Decker, chief executive and president, in a press release. “Our performance reflects continued strength in demand for home-improvement projects.”
Total customer transactions, however, fell to 467.4 million in the second quarter from 481.7 million a year earlier. Home Depot said its average ticket rose 9.1% to $90.02.
The company reaffirmed it expects total sales growth and comparable-sales growth of about 3% for the fiscal year. It expects per-share earnings growth in the mid-single digits, although investors may have been hoping for more clarity here: 5% growth would imply below-consensus earnings of $16.30, while the current consensus calls for closer to 6% growth at $16.47.
Wells Fargo analyst Zachary Fadem said Tuesday that Home Depot “delivered very solid results across the board, illustrating the resilience of the Pro and suggesting underlying housing metrics are (at least currently) likely less bad than feared. ” He rates the stock at Overweight with a price target of $350.
Home Depot’s quarter demonstrates how investors have soured on the home improvement sector, given worries of a cooling housing market and waning pandemic strength. Aside from the decline in transactions and reiterated guidance, there was a lot to like about the quarter, but the market has been quick to punish the shares as it continues to brace for macroeconomic pressures.
Lowe’s was down 0.4% in premarket trading. The decline in transactions could be spooking investors about that stock, as Baird analyst Peter Benedict noted that Home Depot’s U.S. comparable sales have outpaced Lowe’s about 410 basis points on average over the past four quarters.
“Applying a similar gap as the first quarter would imply flattish comps at Lowe’s …That said, given Lowe’s higher seasonal/DIY exposure, we would not be surprised to see a slightly negative comp at Lowe’s.”
Write to Joe Woelfel at joseph.woelfel@barrons.com
Source: finance.yahoo.com