Home Depot Stock: Weather, Consumer Backdrop To Dent Results

Home Depot reports Q2 earnings early Tuesday. Analysts expect another difficult quarter for the Dow Jones retailer amid a downturn in the labor market and consumer budget restraints. HD stock is consolidating ahead of results.

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FactSet expects Home Depot (HD) to report a 2.9% decrease in earnings to $4.53 per share adjusted. That would mark six consecutive quarters of earnings declines. Analysts predict a 0.8% revenue slide, to $42.57 billion, also a sixth straight decline.

Experts forecast same-store sales will slip for the seventh quarter in a row, targeting a 2.2% decrease in comparable sales. Home Depot in May reported a 2.8% decline in same-store sales during the first quarter. The last time the Dow retailer recorded a same-store sales increase was Q3 2022.

Despite all the glum numbers, CEO Ted Decker said that Home Depot continued to grow market share in Q1, even amid ongoing softness in larger discretionary products.

Home Depot at the time maintained its 2024 guidance of 1% EPS and revenue growth. The company forecasts same-store sales decrease 1% for the year.

Weather Impacts, Water Heating Up

Last week, Bank of America noted that weather trends throughout the quarter, including a rainy May and hot June, could limit seasonal recovery expectations for Q2, The Fly reported. Still, Home Depot is well-positioned in a “choppy” macro environment, the firm wrote.

Truist at the beginning of August lowered its comparable sales estimate for Home Depot based on card data for the quarter, The Fly reported. Truist expects home improvement activity to eventually reaccelerate. But the timing is uncertain due to a modest rise in existing home inventory levels, which could potentially put pressure on housing prices. The firm lowered its price target on Home Depot stock to $396 from $406 but maintained a buy rating on the shares.

Meanwhile, JPMorgan in an Aug. 5 note wrote it expects that the “boiling of the frog consumer backdrop” will persist as the labor market weakens and consumer balance sheets deteriorate, particularly for low-income consumers. The firm predicts that the “water heating up” will drive increased promotions among retailers, including Home Depot. JPMorgan lifted its price target on Home Depot stock to 400 from 377 and kept an overweight rating on the shares.